When Tax Returns Become Newfound Assets

Yesterday, I discussed what people should do with their tax returns if they are considering filing for bankruptcy. But what about the homeowners who have already filed bankruptcy but forgot to list their tax refund as an asset?

In Maryland, people entering a Chapter 7 bankruptcy are allowed to claim nearly $12,000 in property as exempt. Tax refunds certainly qualify as an asset in that category—assuming that you included the amount on your original paperwork.

If you either forgot to include the refund when originally filing or did not include it because you were unsure of what the amount of the refund would be, you can still amend your filing to have it included as an asset and exempt it. You will want to amend your filing as soon as you are aware of what the amount of your refund will be, as some trustees will ask the Internal Revenue Service (IRS) to send refunds not listed or exempted directly to the trustee.

More often than not, people who are filing or have filed Chapter 7 bankruptcy will be allowed to keep their tax refund, but your safest route to ensure you are able to hang on to it is to speak with a bankruptcy lawyer who can be certain you have tied up all loose ends. In a Chapter 13 case, you must give the trustee your refunds, and timing is everything. If you have additional questions about how to handle filing your taxes while filing for Chapter 13 or Chapter 7 bankruptcy, my firm offers a free initial consultation.

Law Firm of Kevin D. Judd – Maryland bankruptcy attorney

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