Can I Lose My Tax Refund in Chapter 7 Bankruptcy?
Many people never even consider that their tax refund is an ASSET in their bankruptcy case! Most people count on that little extra tax refund money – to buy a used car, catch up on bills or cover those “cracks” money just seems to run through.
However, it is an asset – even if you have not yet received it back from the government. If you have a tax refund coming at the time you file a Chapter 7 bankruptcy, it is an asset that the Trustee can and WILL take if you cannot protect it with a bankruptcy “exemption.” If you owe money to a state tax entity (like the California Franchise Tax Board) but have a refund coming from the IRS, you lose the refund but still have to pay the State taxes. You don’t get to offset the State tax debt against the IRS refund.
Will I Lose Next Year’s Tax Refund in a Chapter 7 Bankruptcy?
When we talk about “next year’s tax refund” we are speaking about (more…)