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Will My Tax Refund Be Lost If I File Bankruptcy?

Will My Tax Refund Be Lost If I File Bankruptcy?
"Numerous insolvent individuals are concerned about losing their tax refund. How your tax refund is handled depends on when you file and which chapter you choose. In chapter 13, the debtor makes monthly payments to the bankruptcy trustee for three to five years. Unless the debtor's plan proposes to pay off 100 percent of unsecured debt through these payments, the trustee is permitted to seize a portion of the debtor's refund each year they are in bankruptcy. Currently, in Utah, a debtor is permitted to retain $1,000 per year, plus an additional $1,000 per year if the refund includes earned income or additional child tax credits (EITC or ACTC). The remainder must be distributed to creditors by the trustee. Chapter 7 petitioners are treated differently. A chapter 7 case in Utah typically lasts only a few months. A typical no-asset chapter 7 case filed in March may be closed in June, and the debtor will not be required to surrender any tax refunds because the previous year's refund was already received and spent (assuming the taxes were filed and the refund was received prior to filing the bankruptcy) and the following year's refund will be received well after the case is closed.In Utah, chapter 7 trustees typically begin requesting the return of tax refunds for cases lodged in September or later. This is due to the likelihood that the case will still be pending when tax returns are due. However, the trustee must allow you to keep a portion of your refund relating to the prorated portion of the taxable year during which you were in bankruptcy. Nevertheless, the trustee must permit you to retain 1/12th (one month out of twelve) of the refund, as you will have been in bankruptcy for the month of December. Consequently, if you file for bankruptcy at the beginning of the year and have not yet received your tax refund, you will forfeit the entire amount. The only method to prevent a chapter 7 trustee from seizing your tax refund is to receive and spend the refund before filing for bankruptcy.
" - https://www.affordablecebu.com/

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"Will My Tax Refund Be Lost If I File Bankruptcy?" was written by Mary under the Finance / Wealth category. It has been read 96 times and generated 0 comments. The article was created on and updated on 01 June 2023.
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