Southern Division Judge Finds That Joint Tax Return is Not Entireties Property

Several bankruptcy courts in Florida have held that an income tax refund payable to a husband and wife from their joint tax return is considered to be tenants by entireties money which is exempt if one spouse files Chapter 7 bankruptcy. Now, one bankruptcy judge disagreed and reached a different conclusion.

A recent bankruptcy court decision in the Southern District of Florida found that a single debtor may not exempt as entireties property a joint tax refund received after the bankruptcy filing date. The court said that when each spouse has a separate job and separate paycheck of differing amounts, each pouse has a separate interest in a tax refund. Because of each spouse’s divisible interest in a joint refund the efund does not have the necessary unity of interest to support a claim that the refund is tenants by entireties property.

The bankruptcy judge acknowledge that prior bankruptcy courts have decided different, but this judg did not find the other courts rationales to be persuasive.

The court noted that if the joint tax refund had been received prior to the debtor spouse’s filing and then deposited in a joint bank account that the money might be exempt as tenants by entireties because joint accounts are presumed to be exempt entireties funds. .