Tax Refunds in Chapter 7 Bankruptcy

Tax Refunds in chapter 7 bankruptcy.  In a bankruptcy, you have to disclose all your assets.  In chapter 7, You keep whatever assets are exempt.  Be sure to list all your assets. Don’t forget that the tax refund for taxes withheld before you filed bankruptcy is an asset.

For example, let's say your employer withholds $1,000 more than you owe for taxes in 2017.  Then you file bankruptcy in February 2018, before you receive the 2017 refund.  You must list that refund as an asset.  Hopefully, it will be exempt and you can keep all of it.

Let’s say you file for bankruptcy in July 2018 after you received your 2017 tax refund and after you’ve spent it.  Then you do not list it.  It is not an asset on the day you file bankruptcy.

What if you file bankruptcy in June of 2017? In that case, the portion of the withholding that occurred from January through June is an asset.

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