What is the impact of filing Bankruptcy and Tax Refunds?

January 12th, 2010 by Questions

What if you received a tax refund in the same year you file for Bankruptcy. Say you received a refund in April and you filed Bankruptcy in June of the same year. How would that be dealt with?

Posted from: Ontario

Questions

One Response to “What is the impact of filing Bankruptcy and Tax Refunds?”



, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

When you file for bankruptcy you automatically loose all tax refunds for the year of bankruptcy and any previous years (assuming you haven’t already received these funds).

So if you received a refund in April, and in June you filed for bankruptcy, because the funds have already been sent to you, they are yours.

Now this becomes a little more complicated if you still have the money from the refund sitting in the bank. If you have any money sitting in the bank, there is a risk that in will have to be turned over to your trustee. This has noting to do with the money coming from the tax refund itself, the reason is that savings are not protected. You are allowed to have sufficient money in the account to cover your living costs, and perhaps a small reserve, but the rest is something that technically has to be distributed amoung your creditors.

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