Will the bankruptcy court take a tax refund?

It depends on the individual. Your lawyer should be able to answer this question the best because they know the situation. I had this same question. My lawyer told me that no they will not take tax refunds. However, if you owe student loans to the government they could take your refund. I had no problems receiving my tax refunds after filing bankruptcy.

AnswerI believe if you get any type of money over $2000 the court will make you pay it on your debts, if you receive it within 6 months after the discharge. When I went to court, they told me if my taxes totaled more than $2000, we would have to pay it to the court. We only got $1200, so we got to keep it. AnswerThe answer to that question varies from jurisdiction to jurisdiction, and also depends somewhat on which Chapter of bankruptcy you are filing. In Southern Indiana, trustees have recently started taking tax refund checks of $1,000.00 or more in Chapter 7 cases. In Chapter 13 cases, some trustees take half regardless of the amount, and others take half if it is a sizable amount, and none if it is $1,000.00 or less. Also, each State has their own exemptions (which say how much property you can keep), so if you are in a State that lets you protect a lot of cash, then the threshold at which trustees seize tax refund checks may be higher. A good rule of thumb is to assume you're going to lose it. If you lose a $2,000.00 refund check but you discharge $20,000.00 in bills, you're still $18,000.00 better off, so forget the refund and move on with your life. And, if you luck out and get to keep it then you're pleasantly surprised, as opposed to expecting to keep it then being let down when the trustee takes it. AnswerYep-in Arizona-they took a $600 State refund, and a $1300 Federal refund. Oh well, as long as I am in the clear, what difference does it make? AnswerI'm confused by all the above.

Bankruptcy is done under Federal Laws and in a FED Court. I should think that your State of filing, or residency, would have little if anything to do with the rules they follow -- except to say that the rules concerning property and such (like Arizona is a community property state), may have influence.

When filing you must claim and attest to all of your assets and liabilities to the court. Obviously, penalties for not doing so correctly can and should be fierce. Forgetting an asset - and then keeping it - that just seems to be fraudulent and possibly criminal. An anticipated refund (tax or otherwise) would be an asset you must declare. I should think that like any other "free" asset, it may be used to satisfy creditors.

It certainly should be...if I was a creditor and you asked the court to eliminate a debt you owed me....and it did - but at the same time allowed you to continue to look in the mail every day until Bank US sent you some cash you had stashed with them....that would be grossly unfair! You can imagine why: I can manipulate easily the amount of refund I expect, in anticipation of bankruptcy or even during, many ways: Decrease the number of withholding exemptions I request from my payroll (so more money is withheld), even make an estimated payment (or have additional amounts withheld from payroll) - which self employed or someone with non-employee income (like investment income, etc.) is required to do.

More InputBankruptcy can either be a state or federal filing depending on whether or not the state has opted out of the federal bankruptcy procedure and the amount of debt.

Tax refunds are levied depending upon the time difference between the bankruptcy filing and the receiving of the refund. In many cases the amount a federal refund is subject to levy will be pro-rated monthly. Please see the link for "Bankruptcy Action" to find out if your state requires federal or state bankruptcy filing or a choice between the two.

More on the moreI'm fairly certain Bankruptcy is ALWAYS handled under Federal Law, at a Federal court. There is an entire level of Federal courts that only does bankruptcy and interestingly, it has major power and can trump and take control of matters even in other courts - like litigation. Like most all matters determined to be the purvue of the Feds, a State cannot opt out - or by essence over take a Federal right/obligation. (And when you consider operating Courts is expensive, they have little motivation to). The federal nature is needed, if for no other reason than to avoid (perceived or otherwise) preferential treatment of a state resident creditor/debtor to those who may also have something at stake in the filing but aren't a taxpayer or resident there. It would be making them subject to the dictates of a jurisdiction that they aren't supposed to be subject to - a Constitutional issue.

However, maybe the confusion is that as in all Federal courts, there are many different DISTRICTS of the US Bankruptcy Courts, generally with District names of the primary area they cover. EX: US Bankruptcy Court of the Alabama District; US Bankruptcy Court Eastern District of New York, etc., etc.

As in all Federal District Courts, some procedures, limits, and many precedents (generally decisions) are individual to that Circuit, and in fact, may be entirely contradicted in others. (When this becomes too problematic, it becomes a US Supreme Court matter to decide what should be universal).

I would agree it makes sense that only that part of a tax overpayment that is from the pre bankruptcy filing period should ever be subject to the bankruptcy. (So, something along the way of if you filed bankruptcy half way through the tax year, only half of the overpayment is subject to bankruptcy). Note a Corporate taxpayer may have a different result because it has a "short tax year", with one starting and ending on the date of bankruptcy.

Actually, the States can "opt out" of the Federal Exemptions for Bankruptcy actions. In Maryland, state law determines exemptions and collection procedures.

The short answer is yes, the Trustee may attempt to go after your tax refund AND, depending on the state you are in, you may be able to get it Exempt (meaning, Trustee can't touch it).

Generally, depending on what Chapter you filed under, the issue of your tax refund will be included in the "plan" decided by the court. They are decided on an individual basis but forfeiting a portion of your tax return if it is over a certain amount seems to be what is currently happening.