March 3, 2020

Will They Take My Income Tax Refund Check When I File Bankruptcy?


Each Spring, many people look forward to receiving an income tax refund check. But what happens to your income tax refund check when you are filing for chapter 7 bankruptcy? Keep reading to help maximize your tax refund dollars.

QUESTION: Will they take my income tax refund check when I file for chapter 7 bankruptcy near Toledo, Ohio?

RULE: Tax refunds are a part of a debtor’s bankruptcy estate. (However, keep reading for educational tips (not legal advice) to help you keep more of your income tax refund check, while eliminating debt by filing for chapter 7 bankruptcy relief near Toledo, Ohio.


ANALYSIS: So you are hoping to use your income tax refund check to both pay your chapter 7 bankruptcy attorney fees as well keep some of it for savings. Begin by consulting with an experienced Toledo, Ohio chapter 7 bankruptcy attorney who can review your unique situation and offer guidance. With a little strategy, you may be pleasantly surprised and not only be able to pay your bankruptcy attorney fees, but also reserve a portion of your income tax refund for savings and pay for some necessary home and car repairs. Timing and proper guidance are key. For illustrative purposes only, below are 2 examples of a debtor who is anticipating an income tax refund while preparing for a forthcoming chapter 7 bankruptcy. Example (1) illustrates a more favorable outcome after receiving guidance from their chapter 7 bankruptcy attorney. Example (2) illustrates what may occur without proper timing and guidance:

(1) Anticipated Income Tax Refund: $6,000.00 (Example of favorable outcome)

  • Proposed Expenditures (prior to filing chapter 7 bankruptcy)
    • Bankruptcy Attorney Fees:                  $1,000.00
    • Bankruptcy Court Filing Fee:              $335.00
    • Necessary Car Repairs:                         $965.00
    • Necessary Home Repairs:                    $1,200.00
    • Wildcard Exemptions (2):                   $2,500.00 (debtors keep money)


(2) Anticipated Income Tax Refund: $ 6,000.00 (Debtor waiting to receive tax refund)

  • An income tax refund that is still forthcoming to a debtor on the date of your bankruptcy filing becomes property of the bankruptcy estate. Thus, the bankruptcy trustee may be entitled to take a large portion of your tax refund, less any individual exemptions. (POSSIBLE $0 balance leftover)

ANSWER: Those who take the time to consult with a Toledo, Ohio chapter 7 bankruptcy attorney before receiving an income tax refund check can make the most of their individual situation. A limited number of bankruptcy exemptions exist which may help protect some of your income tax refund check. Also, you may be allowed to strategically spend a portion of your income tax refund check on certain necessary expenditures, such as a needed car repair. Luxury expenditures, such as vacations and payments to family and friends should be avoided.

DISCLAIMER: Individual situations vary. The above is solely for educational purposes and is not to be construed as legal advice. Consult with a qualified Toledo, Ohio chapter 7 bankruptcy attorney prior to receiving your income tax refund check. France Law Group is a debt relief agency. We help people file for relief under the United States Bankruptcy Code.