What happens with my tax return if I file bankruptcy?

February 19th, 2015 by Questions

If I file bankruptcy and have already received my tax return… What happens?? If I’ve already spent it on clothing or food.. Will I need proof?

Posted from: Newfoundland and Labrador

Questions

One Response to “What happens with my tax return if I file bankruptcy?”


February 19, 2015 at 9:24 am, Doug Stuive, CA | Trustee | CIRP said:

That depends in part on the Trustee that you are dealing with and what was discussed relating to the income tax return. In general, the trustee is responsible for filing any return that was not yet filed as well as the return for the taxation year of your bankruptcy date. So, if you have already done your income tax return before filing and have spent the money of basic necessities this usually does not present a problem when filing for bankruptcy. However, if you had discussed that the income tax refund was to form part of your bankruptcy estate and then proceeded to use the refund for other things you may have to make payments to your trustee for the amount of money you received. This would be at the discretion of the trustee and would require you to be in touch with your trustee directly.

Many individuals in financial difficulty rely on their income tax refunds to help them catch up on basic living costs so it is not unusual for a person to file their income tax returns at the first opportunity and spend the refund quickly.

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