Tax Refunds in Chapter 13 Bankruptcy
It’s tax season again. That means people across the country fortunate enough to receive one are starting to think about what they are going to do with their tax refunds. People in bankruptcy are no different. Nothing would be worse than going through your bankruptcy and not getting your discharge because you’ve spent your unprotected tax refund because you didn’t speak to your attorney first.
Unfortunately, those in bankruptcy don’t always have the luxury of doing whatever they want with their refunds. One of the basic premises of Chapter 13 bankruptcy is that Debtors must provide their trustee all of their disposable income to pay back a portion of their debts. A tax refund is just like any other form on income received during your case and can be subject to collection by a Chapter 13 Trustee.
Different trustee’s and judge’s treat tax refunds differently. Some don’t require their turnover. Some always require their turnover. Some decide on a case by case basis. It is important to talk to your bankruptcy attorney before filing bankruptcy to discuss your potential tax refunds and for what you intend to use yours. And if you’ve already received your tax refund, speak to your attorney before your spend it. If you are required to turn it over, there may be something your attorney can do to help.
This Blog was written by Attorney Jeremy Iskin, Esq. of The Dellutri Law Group, P.A. Mr. Iskin practices Bankruptcy Law, Fair Credit Reporting Act Law, Fair Debt Collection Practices Act Law and in other areas of Consumer Law.
