By Kitty J. Lin, Attorney at Law<\/p>\n
With tax season here, many consumers have received or will receive a tax refund.\u00a0 What happens to your tax refund if you have already filed bankruptcy, or will be filing for bankruptcy in the future?\u00a0 It would depend on what stage you are at in your bankruptcy case.\u00a0 Here are some scenarios:<\/p>\n
You have received a tax refund and you have not filed for bankruptcy yet<\/strong><\/p>\n <\/strong><\/p>\n It is very important that you communicate to your bankruptcy lawyers<\/a> if you have not filed your tax returns yet and if you expect a refund. If you have already received a refund before you file your bankruptcy case, it would be considered an asset in your bankruptcy estate.\u00a0 However, since you have not filed your bankruptcy case yet, if you require the funds from your tax returns for necessary expenses, such as food, shelter, utilities, property taxes, attorney fees, etc. you are free to spend it on such items.\u00a0 If, after using your funds from your tax return for all the necessary items, you still have money left over, it will need to be included in your bankruptcy petition.\u00a0 These funds will need to be exempted.\u00a0 See Asset Protection in Bankruptcy<\/a> for more information about California exemptions.<\/p>\n <\/strong><\/p>\n Your bankruptcy case is filed, but you expect or have already received a refund<\/strong><\/p>\n <\/strong><\/p>\n If you have not received a refund before filing your bankruptcy case, whether you are able to keep your tax refund will depend on how much the exemptions you have available.\u00a0 First, one of the most important aspects is to be sure that your expected refund (even if you have not received it yet) is listed on your petition.\u00a0 If you have exemptions available, then it will be protected and you would be able to keep all of the exempted refund.\u00a0 If you do not have any exemptions available, then the trustee may be able to take a pro-rated portion of your tax refund for the benefit of your creditors in the bankruptcy estate.<\/p>\n You expect to receive a refund, but it was not listed in your bankruptcy petition<\/strong><\/p>\n <\/strong><\/p>\n If you know you will receive a refund but you intentionally decide to not disclose it in your bankruptcy petition, the bankruptcy trustee may require you to turn over the funds to the bankruptcy estate for the benefit of your creditors.<\/p>\n