Question Bankruptcy closed 2021 but told I have to send my 2021 tax return to my trustee?

[Seren12]

Looking for some clarity here as I'm really confused,

I filed Chapter 7 last year around 2nd quarter and it was discharged and closed before the year end. Part of the process, of course, was sending my bankruptcy trustee my tax documents for the previous 3 years including 2020 tax information. I had already spent my 2020 tax return at the time of filing so did not have to send him that. I was also unemployed throughout all of 2020 and up to and including the time of my 341 creditor meeting in 2021.

Now, I am being told by my lawyer that I have to send my bankruptcy trustee my 2021 tax return - that he will take out "his portion" and send the rest back to me. Huh? What is "his portion" of my 2021 tax return? I didn't even begin working until September so the chunk I did get back in taxes was for taxable income I obtained after the bankruptcy. How do I send it to him anyway I already had it direct deposited into my checking account. I'm just supposed to send him all of the money I got and hope he sends me some back? This seems really strange and I'm concerned.

Could really use some guidance here. Is this a legit thing and something I have to do? If so, what's the best way to go about it? Can I send my tax inforamtion to the trustee and have him tell me how much I owe him for "his portion" whatever that is? As opposed to me sending him all of it as a check or something and just hope to get something back?

Please help me.

[despritfreya]

How much is the refund and please supply the initials of your Trustee's first and last name.

Generally, once a case is closed, the Trustee has no further interest in the case. HOWEVER, just because the case is closed doe not mean it cannot be reopened to administer an asset.

Also, just because you began working after you filed does not mean the refund is not at risk. A number of factors go into this.

Des.

[bornfree2]

Seren12 Standard disclaimer: I am not a lawyer. This is not legal advice but my own thoughts and opinions. Do your own research and always seek qualified legal advice.

If I were faced with such an issue, I would begin to research what laws/rules the Trustee is standing on to claim 'a portion' of the tax return. The search would begin with the issues at hand. 'tax return', 'tax refund', 'post petition', 'pre petition', 'trustee', 'turnover', 'portion'. Finding such laws/rules, I would search for case law that deals with those keywords on google scholar. This would open up a huge field of investigation for you.

Using such a strategy, here is what I found:

Authority for Trustee to demand 'portion' post petition appears to be based on 11 U.S. Code § 542(b) - Turnover of property to the estate.:

(b)
Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.

Then I keyword search google scholar for all cases deal with 11 USC 542(b). There are many hits, and I would further refine searches as I discovered various issues they describe. Example search I tried:

• 11 usc 542(b) trustee turnover tax refunds

One particular case sounds similar to your situation and well worth a read:

• In re Andrea H. MEYERS, Debtor-Appellant

This case involves a recurring question under the bankruptcy laws: what belongs in the bankruptcy estate?...The question we must resolve in her appeal is how best to allocate post-petition tax refunds when the debtor filed her bankruptcy petition in the middle of the tax year. The bankruptcy court used a mechanical system known as the "pro rata by days" method to calculate the proportion of the refunds that belonged to the pre-petition asset pool. Meyers filed her petition approximately 73% of the way through the tax year, and accordingly, using that method, 73% of her tax refund qualified as a pre-petition asset. In taking that approach, the bankruptcy court followed a well-trodden path. Meyers, however, thought that it was the wrong path and took an appeal to the district court. That court affirmed the bankruptcy court, and now Meyers is before this court seeking to persuade us that the estate received too much. While we recognize that the pro rata method may not be appropriate for all cases, we find that the bankruptcy court properly applied it here, and so we affirm.

So at first reading it appears 'portion' may be referring to this pro-rata calculation. The cases talks about how this calculation is established with special attention to the petition filing date, (" Meyers filed her petition approximately 73% of the way through the tax year, and accordingly, using that method, 73% of her tax refund qualified as a pre-petition asset."). Attention is also given to the any amount of wildcard exemption that can be used to lower that amount further.

There are several other cases referenced there that I would also read but havent.

The nice thing about reading appeal cases is you find out what strategies people have used and how the court has explained and decided the issue. Just keep in mind you will often find contradictions in approaches and decisions. I mean how poor would lawyers be if they didnt disagree on everything right?

I didnt read the entire thing but thats how I would begin to research this issue for own self. Id then be armed with knowledge that I could have a more informative discussion with an attorney - of which I am not.

Lastly, I began this search with some law books I have at hand by using the index under 'taxes'. In there was a form letter a Trustee could use to the IRS demanding the refund and the code which they assert (11 USC 542(b)). (See Consumer Bankruptcy Handbook with Forms - Hon. Michael B. Kaplan, Hon. Stacey L. Meisel p.532) There is a thread in the Pro Se forum that talks about books and resources for further research.