Earned Income Credit and Chapter 7 in New York?

[Lindsay]

We will probably get a good amount of Earned Income Credit for tax return filed in January as our business sales were very low this year. I know the trustee can seize a tax return. Does anyone know if they seize the Earned Income Credit portion or just the actual taxes withheld from the employer. We're in NY. We usually use the tax refund to pay our property taxes. I'm wondering if it would be more prudent to wait a few more months and file after we apply for the refund and pay the taxes with it. I'd rather file in the next 30 days though. I really wouldn't be too upset if they took the refund because it would be a great trade-off for getting out of this mess, but it would obviously be better if we got to keep it.

I've tried searching online for this, but I wasn't able to find out anything in specific.

[lrprn]

In Illinois at least, in 1999 one debtor successfully kept his Earned Income Credit when his trustee tried to take it - http://www.wellsofjustice.com/tax.pdf

Hopefully one of our more tax-savvy members will be able to give you an answer that fits your individual situation.

[B12]

I believe the federal EIC is totally exempt. Check with an accountant though. This is a very important question.

[wellspring]

I'm in NY and I get a huge chunk back from the IRS, most of it being the EIC and child care credit. My trustee saw my last two years returns and made a comment about how large it was. He wants to see this years return when I file, so I'm assuming he wants a portion of it. I did however raise my exemptions last year to 8 and after I filed BK, I filed a W5 for the advanced EIC. I am hoping it will reduce my refund more so he won't be interested in the rest. I'm assuming the EIC isn't exempt as he was so interested it the return, but I'm no expert by far. I've searched the internet and found nothing that really tells me whether it's exempt or not. I found a good site for figuring out your exemptions though and that's www.paycheckcity.com. You can play around with the calculators there and it will tell you how much your pay will be. Hope this helps just a little!

[Bobby'sGirl]

In Indiana EIC is exempt

Trustee didn't touch that part of my tax refund, and I was able to use wild card to exempt remainder of return. Look carefully at your state exemptions to see if EIC is also exempt in NY. It is listed exempt in our state's bankruptcy statutes; try calling a few legal clinics for free info! Even though in our area they don't do bankruptcies, they were able to point me in the right direction for the statutes.

[B12]

I have searched and cannot find anything on NY either.

The EIC is a FEDERAL program and was implemented to keep people working and off welfare.

The tax ramifications makes it so that it is worthwhile to work rather than to get government assistance.

I just cannot see a trustee being able to take this Federal money.

But, make a call to an accountant. I am sure this question will be answered. Many, many accountants work with people in BK and a good one should know.