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Will my tax return be taken if I file bankruptcy?

Portland, OR |

I am thinking about filing Chapter 7 bankruptcy but want to know what that does for my tax return if I do so?

Attorney Answers 6

Posted

It depends on whether you have any exemptions you can assert to protect the refund. And what exemptions you would use depends on whether you have lived in your present state for at least the past two years. You can always delay filing bankruptcy until after you have received and spent your tax refund, but bankruptcy trustees often what to know where that money went, so it's best you get a consultation with a bankruptcy attorney now so you can properly plan and avoid making any mistakes that may come back to bite you later.

The information provided herein does not create an attorney client relationship and is not a substitute for having a consultation with a bankruptcy attorney. It is important to have a consultation with a bankruptcy attorney as the information provided in this forum is limited and cannot possibly cover all potential issues in a given situation.

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2 comments

Richard D. Granvold

Richard D. Granvold

Posted

I wont repeat what Ms. Larkin carefully answered but will add to it importantly that it also matters whether you presently owe any IRS debt also as it would be offset against that. Aside from creditors like IRS obtaining it, then easy..if exempt you get to keep it!

Shaye Larkin

Shaye Larkin

Posted

Mr. Granvold is correct. If you owe past due taxes, child support, and delinquent student loans, for example, your tax refund can be seized to pay those debts.

Posted

The answer to your question depends on several factors. The first is the amount of your tax return; if it is small then maybe you can protect it with your wildcard exemption. Another factor is which trustee you get in your case. Some trustees are more aggressive about going after your tax return; others don't bother.

The answer given here is for educational purposes only so those who need a lawyer can have a more successful initial meeting with a lawyer of their choice. The statements are not legal advice and the intention of this writing is that no attorney-client relationship is formed by those reading these answers. Also be sure to get a second opinion to the answers given here if you choose to do so.

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Posted

A tax refund is an asset and must be declared. You can apply the exemptions. OR allows the use of either the federal exemptions or the state exemption. As Ms. Larkin suggested if you are to receive a large refund (other than child credit or low income credit) wait until you receive it. OR state exemption include up to $7,500 in a bank account.

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Posted

The return is the paperwork, and every bankruptcy trustee requires you to turn over the paperwork. The refund is the money, & whether you can keep the refund depends on the exemptions that are available to you and how skillfully you chose those exemptions. Hope this perspective helps!

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Posted

In some circumstances, the bankruptcy trustee will claim your tax refund. For example, it may depend on the amount of your refund, whether you have claimed any bankruptcy exemptions to protect the refund, whether you have other non-exempt assets, whether any part of the debt is Earned Income Credit, and whether you owe prority debts (such as back child support or back taxes).

If you want more information, you should discuss your case with an Oregon bankruptcy attorney.

I am licensed to practice law in Oregon only. If you live in any other state, you will need to contact an attorney in your home state. My response to your question does not create an attorney-client relationship. If you would like to retain my services, you will need to contact me to schedule a consultation.

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Posted

If you file bankruptcy before you receive your refund, it is most likely that the trustee will take the refund. If you file bankruptcy after you receive your refund, it is most likely that you will get to keep your refund. The refund can also be used to hire an attorney to file a bankruptcy for you. It is well worth it to have a professional guide you through the process.

This is not legal advice and I am not your attorney until you retain my office. Always consult with an attorney in your area before acting on anything you read on the internet.

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