Expert: Mark J. Markus- California Bankruptcy Attorney - 10/26/2009

Question
QUESTION: I have filed an amended tax return for 2005 for a refund.  However the IRS has denied it and I have responded with an opposition two months ago.  So now it's in limbo.  Will this affect the filling of Chapter 7 NOW, assuming that I qualify for all other aspects of Chapter 7?

ANSWER: No, as long as you list the potential refund as an asset I don't see how it would affect anything.

http://www.bklaw.com/

---------- FOLLOW-UP ----------

QUESTION: 1)Let's say if I receive the 2005 tax refund two months after the discharge, will that refund still be the estate of the trustee and be distributed among the creditors? Being that the refund is large enough to pay off the creditors.  Another words, is there a time limit for the tax refund to still be considered an estate of the trustee?

2)I received a tax refund for 2008 in May and have lost in gambling most of it.  It's a five digit refund and I was trying to make some quick money to pay off all my debts, but ended up the reverse.  Will that be a problem filing Chapter 7?  I know you need proof for everything.  But giving cash to the dealers in exchange for chips does not give me any receipts.

Answer
When you receive the refund is irrelevant.  It's property of the estate if you're entitled to receive it, and that occurred in 2005, so if you don't have any exemptions available under applicable laws then the Trustee is entitled to it in a Chapter 7 case.  For more on exemptions, see http://www.bklaw.com/exemptions.html

As to your second question, it's possible it could be a problem.  Failure to adequately explain any loss or deficiency of assets is grounds for denial of discharge, and record keeping is part of that equation.  If you don't have a history of gambling, such as listing winnings and/or losses on prior years tax returns, you could have a problem,  but that's a complicated issue and beyond the scope of this service.  You need to discuss this with a qualified bankruptcy attorney.