When you file bankruptcy you have to list all of your assets, including those you may not have yet. For example, even if you have not filed your taxes or haven’t received the refunds yet, you still have to list the tax refund as an asset in your case. When you list your tax refunds, you will list it as a pro rata estimate based on the date of filing. As an example, if your case is filed on December 12, the share of the tax refund belonging to you on the date of filing is about 95%.
In bankruptcy you have exemptions to protect your assets. In Minnesota, you can pick to use either federal exemptions or state exemptions. Whether you file a chapter 7 case or a chapter 13 case, the results of your exemptions will be treated differently.
A chapter 7 bankruptcy case is a liquidation bankruptcy. If you cannot exempt your assets, you will need to turn them over to the bankruptcy estate or buy them back to keep them. In the case of assets that are liquid, like tax refunds, this means turning them over. If you are able to exempt a portion of your tax refunds or the entire thing, then you keep the amount of your exemption.
A chapter 13 bankruptcy case, is a restructuring of your debt. In a chapter 13 case the standard language for a case says you will keep $1,200 of your tax refunds for a single filer and $2,000 for a joint filing. Your attorney may be able to adjust these numbers depending on your situation. Anything above the threshold that you keep, would need to be paid to your creditors as an additional plan payment.
If you have questions about your taxes, make sure to speak with your bankruptcy attorney.
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