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I filed chapter 7 bk in April 2012, how much of my refund will I loose? I filed my taxes Feb,6th refund amount is 7,021.00

Chandler, AZ |
Filed under: Chapter 7 bankruptcy

I have received contradicting responses from the web , I read that they can legal only take what you were taxed on before your filing date , Please ? Some one give me a real legal answer

Attorney Answers 6

Posted

Is your bankruptcy even still open? Has your trustee even requested your 2012 tax return?

It would be "very unusual" for a trustee to request a tax refund for a bankruptcy filed in April of the prior year. However, if push comes to shove, and assuming no exemption, I suppose the trustee could request a pro-rated amount.

For the sake of example, let's assume you filed your case April 30 and your tax refund is $1,200. Since you filed on April 30, you have accrued 4 months worth of your tax refund...which in this case is $400. So, arguably, the trustee would be entitled to the pro-rated share that is $400.

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Posted

I respectfully disagree with your first responder. I don't know a Trustee that wouldn't be licking his chops at a tax refund of $7,021 on a bankruptcy filed in April. A Trustee may be able to claim almost one-third of it for the estate. The exact method of calculating the Trustee's share varied from one district to another. In Idaho we count the number of days, and the refund is presumed to have accrued evenly through the year.

The reason you can't get the "real legal answer" you want is that you haven't provided all the relevant information. Or, we could say that the "real legal answer" is that the Trustee will be entitled to that portion of your tax return that is prorated to the portion of the year that had elapsed before the filing of your bankruptcy petition subject to any valid claim(s) of exemption.

Be aware that the Avvo Q&A is effective at providing pubic information law and legal procedure with exceptional accuracy, but with regard to the application of the law to the facts of an individual case, it's usually not possible. Exemption laws vary dramatically from state to state, so it is not possible to be more definite about the portion of your refund that must be surrendered.

Best wishes for an outcome you can accept, and please remember to designate a best answer.

This answer is offered as a public service for general information only and may not be relied upon as legal advice.

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1 comment

Derek R. Caldwell

Derek R. Caldwell

Posted

I must respectfully disagree. Ms. Sinclair is correct that the way this issue is handled varies from district to district but then goes on to assume that the way it is handled in her district is similar to the way it is handled in most districts. It certainly differs from the way this issue is handled in NC and from what I gather from the other attorneys' posts, from the way this issue is handled in many areas. The best advice any of us can give is that due to the differences in the way this issue is handled, the answer to the question is call your attorney or if you do not have one, call a local attorney who is familiar with the practices where this case was filed.

Posted

If your case is closed and you got your discharge already you are out of bankruptcy and the refund is yours to keep. If your case is still open and you have an attorney you need to let your attorney know and he and the trustee will coordinate how much of the refund is the trustee's and how much you get to keep.
I would be interested to know what you find out. Let us know if your case is closed (and you get to keep that large refund).

This answer is for informational purposes only and may not be relied upon as legal advice.

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2 comments

Paula Brown Sinclair

Paula Brown Sinclair

Posted

That would definitely NOT be the result a debtor could expect in my district. What does the standard "Income Tax Turnover Order" issued by your court say?

Derek R. Caldwell

Derek R. Caldwell

Posted

Ms. Hebron's response is exactly the way it would play out in my district and from what I gather in all districts in NC. suffice to say different districts handle things differently. For example, we do not have a standard "income Tax Turnover Order" and once a case is close, it is closed.

Posted

You need to discuss with your lawyer. If the case has been closed, the asset (if disclosed) has been abandoned BUT a trustee could reopen the case. As far as whether a Trustee would want it, in my district, most would not touch a refund of less than $2500 (one third of your total refund) unless there were more assets in the estate for creditors. It costs more than that in time and expenses just to keep a case open for a small amount, and little would actually go to creditors.

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Posted

In Arizona, it is quite common for the Trustee to seek the estate's pro-rata share of the tax return. The Trustee can only take the pro-rata share of what you earned prior to the filing date, so you are correct in that assumption. Even if your case is closed, I have seen Trustees in Arizona re-open the case to go after a large tax return (I would not be surprised if they go after yours). There are a lot of answers above that give some good insight; however, it is best to speak with an Arizona attorney about this who is familiar with the trends here. I suggest you call a local attorney to get further clarification if needed.

This answer is provided for general information only and is not to be construed as legal advice. This response is not intended to create an attorney-client relationship.

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Gary D. Bollinger

Gary D. Bollinger

Posted

Attorney Ryan wrote, "Even if your case is closed, I have seen Trustees in Arizona re-open the case to go after a large tax return ." In Eastern District of MO, where I practice, the bankruptcy Trustee would not reopen a case after administrative closing unless prompted by a report or disclosure directly to the bankruptcy Trustee. (For example, there is a class action mortgage loan settlement and the lender--who inquires is the class member has filed bankruptcy--learns of the bankruptcy and advises the bankruptcy Trustee) I cannot expect a response from Attorney Hardy, but I wonder how the bankruptcy Trustee obtains tax information on an administratively closed case.

Posted

As you can see, there are a number of differing opinions. You should talk with an Arizona attorney who know the different trustee and what they might be inclined to do.

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