Hey Guys, I Have a Question...

[yanks0826]

I filed bankruptcy a few years ago with no problems. But, now my sister-in-law filed for Chapter 7 a few months ago and she is saying that she has to give up her tax return, is that true? They never asked me for my return, so is she lying?

She does owe her mother money, so I was wondering if she was lying because of that reason.


Thanks

[StaciMM]

Depending on when in the year you file, the trustee can take a part of the refund.

[lostsoul23]

I filed bankruptcy a few years ago with no problems. But, now my sister-in-law filed for Chapter 7 a few months ago and she is saying that she has to give up her tax return, is that true? They never asked me for my return, so is she lying?

She does owe her mother money, so I was wondering if she was lying because of that reason.


Thanks

She will know for sure when she goes to her 341. I filed under the 'old laws' (pre Oct. 17th) and was warned by my attorney I may have to give my tax return up when I filed. When I went to my 341 on the 23rd, I was told I could keep it. The impression I got from the trustee was it depends on how much you got the year before, among other things. For example, the married couple that came was before me will have to forgo their tax return because they average a return each year of $5,000. I also saw a single man get to keep his because he averages returns of $100 a year, but the single woman has to hand hers over because she averaged around $1,000. It was my understanding that for single people, anything about $800 went to the trustee and for married couples it was $1,500. I guess it would be up to the trustee if they sign refund goes to the trustee first and they get the difference or what.

[StaciMM]

The bottom line here is each trustee, and each district, may do things differently. In most states, it is only the actual income tax refund (not child tax credit, earned income credit, etc.) that is part of the bankruptcy estate. Whether or not the trustee will bother will be partially based on the amount.

For the most part, if nothing is said by the 341 (or shortly after) it should not be an issue.

[edwards2]

Yanks0826- The trustee asked about our tax refund which was over $2500 but less than $5000. The trustee also asked when we received it and if we had spent it...duh...that was a no-brainer. We filed in January and received it the first week in February and filed BK in March. Our 341 was in May. It is very possible the trustee will take her refund.

[pink_amulet]

I filed bankruptcy a few years ago with no problems. But, now my sister-in-law filed for Chapter 7 a few months ago and she is saying that she has to give up her tax return, is that true? They never asked me for my return, so is she lying?

She does owe her mother money, so I was wondering if she was lying because of that reason.


Thanks

Yes what your SIL said could be true. I live in Illinois. Our trustee DID NOT ask about our return, however there is someone else on this forum who is from Illinois and they have to turn over their tax return. It basically up to the trustee. So it is is possible that the your SIL is telling the truth.
**Now depending on when your SIL filed, the trustee will only take a percentage of her refund. The trustee does not take tax child tax credit nor earned income credit, so IF she collects those, she probably will get a portion of her refund.
If you want to go through the trouble and snoop her out, you could attend her 341 (if you know when it is), and listen in ...maybe you will be able to the hear trustee will state that he will be taking the refund...it's a shot?

pink_amulet

[yanks0826]

Thanks you for the heads up. She already attended her 341 and according to her, she has to give up all her tax return. She has two kids and usually get around $5,000+ a year. So, she will probably not lose all of it, but a large chunk.

Thanks again for the info.

[StaciMM]

She will probably have to turn it over to the trustee, who will then give her back her portion.

[yanks0826]

So, let me get this straight. Even though her BK is final, she will still need to hand over her return? Who then handles the money and what companies get what? How do they divide up the money?

[StaciMM]

Her bankruptcy is NOT final. The 341 is not the end of the line-its really the beginning. 60 days after the 341 is the deadline for creditors to file objections. Her discharge comes some time after that. The trustee would close her case AFTER discharge, but that would be delayed if there are assets.

If hers is ruled an asset case-such as due to her refund-then the trustee will notify her creditors to submit a claim. That will not change her discharge date. The refund that the trustee takes will be distributed among those creditors that file a claim, and the trustee will get a portion. I don't know how it is distributed. Such as, if 3 creditors file a claim, does each get an equal share, or do they get an amount proportionate to how much she owed them?

Once the assets are fully distributed, the case would be closed. It could be reopened for a year if the trustee were to discover hidden assets, or if she were to receive an inheritance shortly after discharge.