Skip to main content

Am wondering what to do. Am about to file chapter 7 bankruptcy and am worried about my IRS tax refund. Usually get about $8k.

Los Angeles, CA |

I haven't filed my taxes yet but hear that the court often tries to take your refund. What should I do? should I wait for awhile. I believe I can exempt the amount (although I don't know the exact amount yet). Can they / will they take it anyway? Is there some special treatment that tax refunds get?

Or, is it required that I Guesstimate what my refund will be after I file. Am very confused, especially after reading that the month of filing makes a difference. I believe I can exempt it in California

+ Read More

Attorney answers 4


On the date of filing, all legal or equitable interests of the debtor become property of the estate. If you are entitled to a refund on the date of filing (even if you haven't filed your returns yet), the refund becomes part of the bankruptcy estate. In order to be able to keep this property, you must protect it through the use of an exemption.


This really boils down to the local customs and rules that the Chapter 7 Trustees adhere to. Many places will see these tax returns (esp around this time of year) as an asset of the BK that you will need to exempt to protect.

If you are still unsure of your rights, you really should go see an experienced BK attorney to have a thorough liquidation analysis of your property done.

Good luck.


Even Expected Tax Refunds are a part of the bankruptcy estate and must be listed in your Schedule B, at item number 18 or 21. Depending on your state, the exemptions allowed, and what you have used already, you may be able to protect/exempt the refund - or at least convince the trustee to abandon it. Be careful, though, in both analyzing what is expected and applying the exemption, because anything not exempted or abandoned by the trustee may be exposed for collection by a creditor. It is always best to speak with a local attorney about your specific situation.


You may be able to keep your refund if it is exempt. You should review the 2 exemptions programs California law provides, under CCP 703 or CCP 704. The way to exempt the refund is to claim it under the wildcard category. I usually exempt the tax refund by estimating the value at the highest amount anticipated. Another option would be to wait to receive the refund, spend it on legitimate living expenses (such as legal fees) and be able to document the way the refund was spent.

Hope this perspective helps & good luck!