New tax refund question

[NewPage]

My sister typically gets a large federal refund back each year, a portion of it the EIC. She is probably going to file BK this year. Given the developments in my situation of needing to file sooner so that we can spend the refund for what we need to use it for (quarterly tax payments), I advised her of that and said she would need to plan ahead.

Her question is -- can the trustee take the tax refund any year? If she files taxes, uses the refund to pay necessary living expenses, then files BK, will the trustee be able to come to her for 2011's potential refund?

Thank you.

ETA: She is also an OR resident.

[free2breathe]

The panel trustee usually doesn't mess with a refund if the debtor files earlier in the year. The bankruptcy estate includes amounts earned up to the date of the filing. In other words, if your sister filed The first part of Feb, only the percentage of the refund "earned" to that point would be property of the bankruptcy estate. Most trustees don't have any interest in 1/12th or 1/6th of anyone's refund. If you wait to file till later in the year, then the trustees' mouths start watering a little more if there is a chance of a decent sized refund.

Also, EIC is considered exempt in some places. Unfortunately for us in this state EIC is up for grabs, so we'll lose a fair portion of our refund.

eta:here is where the planning part becomes so important. If you are expecting a refund this year, it's good to go ahead and get the refund back, spend it down on reasonable expenses, and then file. If you wait too long to file, you run into the possibility of losing part of the refund next time around. Bankruptcy is like a dance, and you have to really watch the steps lol

[tcreegan]

Hi again NewPage,

Pretty sure EIC is exempt in Oregon...

Tom in Colo