Trustee Pursues Next Year's Tax Refund This Year

In previous years Chapter 7 trustees would inquire about debtors’ income tax refunds after the first of the year through May or June. They would ask if the debtors had filed their tax returns, if they had received a refund which was still in their bank accounts, and if they had not filed, whether they expected a tax refund when they would file. If they had not filed taxes for the prior year the Chapter 7 trustee most often would ask the debtors to provide the trustee a copy of their tax return when it was filed. Thought the second half of a calendar year most trustees, in my experience, did not ask debtors about tax refunds. Some trustees are getting more aggressive

I attended a meeting of creditors this week where the Chapter 7 trustee made the debtors sign an agreement to provide their 2008 tax return when it was filed in 2009. Debtors who attend trustee/creditor meetings in August probably filed bankruptcy in July. If they receive a significant tax refund for 2008 the proportionate amount of refund allocated to income prior to filing bankruptcy in 2007 may be property of the bankruptcy estate. Not all trustees are pursuing refunds from next year’s tax returns, but debtors should be aware that a trustee may want to see next year’s tax return.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida