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Tax refund during bankruptcy

I understand that tax refund is lost in the year of bankruptcy. What about if previous taxes were already collected, do we have to pay it back

Posted from: Ontario

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One Response to “Tax refund during bankruptcy”

A licensed trustee said...

If you receive your previous year’s tax refund BEFORE you actually file for bankruptcy then you may have to provide your trustee with an accounting (written record) of what you did with the funds. If your trustee thinks some portion of what you did may have been inappropriate then yourtrusteehas the right to ask you to pay an amount equal to the inappropriate payments into your bankrupty.

Before you ask, inappropriate uses of your money prior to filing for bankruptcy include things like, gambling or other forms of high risk activity, repaying family members in full rather than sharing with all of your creditors, simply spending the money in a reckless manner.

This is the sort og thing you need to discuss with your trustee BEFORE you file.