Will the Trustee Try to Take My Tax Refund?
It is almost the time of year for tax returns to be prepared and filed! That can also mean the time of year for receiving tax refunds from the federal, state, or local government. Many times, our clients wonder if a Chapter 7 trustee or a Chapter 13 trustee will be able to request a turnover of those refunds.
The question of whether a trustee can request the turnover of a tax refund must be answered by a case-by-case issue. In a Chapter 7 bankruptcy case, the trustees will often review the previous year’s tax return(s) to see if any type of a refund will occur again. If the trustee determines that a refund may be forthcoming, the trustee may issue a tax order. This order requires our clients to provide a copy of the tax return(s) and any uncashed refund check(s). The trustee will then calculate if any portion is present that is not protected by the Bankruptcy Code exemptions and request a turnover of those funds. The trustees are very reasonable and we are typically able to work closely with them when a turnover is requested.
In a Chapter 13 bankruptcy case, the trustee follows a similar procedure. A copy of the tax return is requested and the trustee will review it to see if a refund is expected. Typically, if a refund is anticipated, the trustee will contact us and often, an agreement can be reached with the trustee for the turnover of any requested funds.
Finding a Solution for Your Tax Refund
Many of our clients who anticipate receiving a refund usually plan on spending it on home repairs, car repairs, or any number of things. It can be a deterrence for clients to learn that a trustee might be able to take a refund. However, we can typically work with our clients and the trustees to find a reasonable solution. When you come to Wood & Brewer, we work for your best interests in every matter, including your tax refund.
Give us a call today if you would like to discuss your case!