IL, Bankruptcy/Tax Refund, This will put a twist in your shorts

[familylinc]

Illinois, Old Law Filing on October 14, 2005:
Income tax refund 4488.00. Trustee said send it to her. Later she filed a Motion for the takeover of 10/12ths of the tax refund. I filed an objection that being filed on the 14th there was 18 days after the filing in October and only 13 days prior to. Therefore the month should go to the larger percentage, the debtor as overpayment of taxes after the filing is not part of the estate or in the alternate split the month.

We filed a joint return but after January of that year only one worked. We used 1585.00 on schedule B for personal exemptions. That leaves us 2415.00 still usable for persoal exemptions of our choice with an amendment.
I have seen cases however there they were inclined to say since the spouse did not work then they cannot exempt income that did not come from their wages and therefore the non working spouse cannot claim exemption to that money. The working spouse could up to their limit. This would mean about 1200.00 plus the 2.5/12ths or 875.00 = 2075.00.
However, if they do not let the spouse claim any then the spouse should not use their joint status, standard deduction or their exemption when filing with the IRS.
If we file separate with the wage earner counting theirself and all three kids and using the child tax credit and the non working spouse filing for theirself. the non working gets all of the 47.00 back but the working spouse only gets 1619.00 back. The non working spouse can lay claim to the 47.00. The working spouse can now claim 2.5/12ths of 1619.00 (337.29) Plus the remaining 1213.00 of their 1/2 of the personal exemptions for a total of 1550.29. This will leave 68.71 for the bankruptcy estate. Using the 3/12ths figure the bankruptcy estate will get only 1.80.
The trustee gets the first 25% right off the top. 1000.00 on the original amt.
I would like to get at least 2600.00 leaving 1800.00 for the estate. Do you think this is a negotiating tool between myself and the trustee.
Do you think they can force a couple to file joint and still not let one spouse lay any claim to the refund they help create with a joint filing, standard deduction, exemption and child tax credit?
Take a guess on the outcome and I'll post the results.

[Minnymouth]

Well,
Since the "strong arm of the Court" can pretty much DO WHAT THEY WANT I doubt that they will negoiate much over this.

Unless you file and objection with the Court..... course that will cost you money......

By the time you file, and run the course, you've spent what you would have gotten back.....

And in the end, the Trustee will get it anyways...... Usually...

It's really a NO WIN situation...

[StaciMM]

My understanding is that you must file jointly in order to claim EIC, unless you were legally separated for the last 6 months of the year. I'm not sure about the child tax credit.

[Planet Claire]

The income tax/bankruptcy issues are tricky and very frustrating. My husband didn't file no asset/CH7 with me when I filed 04/12/06. We had no reason to believe we'd get a refund. Imagine our shock when we got back our taxes and we were getting around 3k in total refunds. Well the trustee was most interested in this money even though my husband paid 90% of the taxes and was thus entitled to 90% of the refund. We are still unsure about the status of as our BK lawyer has argued the state is only entitled to 10% of the amount.

[kcj]

Planet Claire
Will they let you prepare pro-forma returns to show what the result would have been had you filed separately?

[pink_amulet]

I live in NW Illinois. We filed under the old law. My husband works, I am a SAHM (non-working spouse) we have 2 children. We filed BK in September, so we would have had 9/12th of our refund taken. We quailfied for EIC, and got over $5,300 back. Our trustee never asked about it, and he never touched it. We aslo had our (IL)$2000 wildcard exemption available, but never needed to used it