Expert: Mark J. Markus- California Bankruptcy Attorney - 2/2/2011

Question
Hi,

I filed bankruptcy this last April 2010.  I am having my taxes done, and anticipate a return of roughly $25,000, between both Federal and State returns.

In the county of Los Angeles California, does the Bankruptcy Trustee have right to take the full amount of the refund, or perhaps some percentage?

I've read that it can be 50 percent if the amount of the refund is over $2000.00 in some states/counties.

Answer
That depends on whether you scheduled the asset in your bankruptcy papers and exempted it.  If you did not, then the Trustee is entitled to a pro rata share of the refund for income earned up until the date your bankruptcy case was filed.  Assuming you were steadily employed throughout 2010 at essentially the same rate of pay, the Trustee would be entitled to approximately 25% of your refund based on the information you provided.   The calculations can obviously be more complicated than that if the facts are different.

That having been said, your case is likely already closed so while the "correct" thing to do would be to inform the trustee that this refund came in, and give them the opportunity to reopen the case to administer whatever share of the refund they're entitled to, you're likely safe to just keep it and move on.

A lot depends on the amounts involved and what you listed on your bankruptcy papers.  You should probably run this by your attorney or another attorney who can get more specifics.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/