If you plan to file for Chapter 7 in the next year, you can also avoid receiving a refund at all by adjusting your tax witholding so that you only pay the tax you owe. By doing this, you’ll receive more money each month and you can avoid getting a tax refund.

How long does it take to file a bankruptcy tax return?

An automatic 6-month extension of time to file a bankruptcy estate income tax return is available for individuals in chapter 7 or chapter 11 bankruptcy proceedings upon filing a required application. Bankruptcy Code tax filing requirements.

How does a trustee work in a Chapter 7 bankruptcy?

A trustee is appointed to represent your creditors, collecting assets and liquidating those assets to pay your creditors. In many Chapter 7 cases, there simply are not enough assets or cash to make it worthwhile for the trustee to take those to pay the creditors.

Where does your tax refund go in Chapter 7?

Tax refunds go to the estate. It’s treated like cash or money in a bank account. (See Can I Keep Cash in Chapter 7 ?) A tax refund based on the income you earned before you file for bankruptcy goes to the estate (but not any part of the refund that’s based on income earned after the filing date.

Can a tax refund be protected in a Chapter 7 bankruptcy?

Your pending tax refund can usually be protected one way or the other when you are filing a Chapter 7 bankruptcy case, depending on how much it is and where you file. Often it is fully exempt and simply yours to keep.

What to do with your tax refund if you file bankruptcy?

Three ways to hang onto your money through careful timing and planning include: Including your tax return funds as part of your bankruptcy exemptions. Spend your refund before you are asked to remit it, using it to cover necessary expenses. Adjust your withholding on your tax forms to minimalize the amount you receive as part of your refund.

Can a bankruptcy trustee seize your tax refund?

Your bankruptcy trustee cannot seize money that has already been spent. If you have recently received a tax refund and are concerned that is might be seized in your imminent chapter seven case, consider spending it on necessary items and services for yourself and your family.