Legal Question in Bankruptcy in New York

Re: Income tax refund after filing Chapter 7

Whether your refund is protected depends on the following factors:

-- How much of a refund you are expecting

-- The attitude of the Chapter 7 trustee

-- Whether you have additional leeway to exempt the refund

You are entitled to exempt up to $2,500 of liquid assets per person. This includes cash, money in the bank and entitlement to tax refunds. If you are married you can double that.

However, if you own your home and claim a homestead exemption, you are not entitled to use the liquid assets exemption.

If your tax refund is nominal, the trustee won't care. Some trustee's will only pursue refunds on cases filed after January first. Sometimes the decision depends on the amount of refund in issue. Technically, the refund is not due you until January first, and you filed your case in November.

However, you should have already had your meeting of creditors. If so, the trustee should have raised this issue. Is he waiting for a copy of your 2008 tax return?

For more information about tax issues in bankruptcy, see this article on my web site:

http://www.bankruptcycanhelp.com/published-articles/2007-05-S-Tax-Consequencs-Bankruptcy.php