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Bankruptcy Law/Tax refund & EIC

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Expert: - 8/21/2006


Question
I filed my bankruptcy(ch 7) in MN last Oct. before the new laws took
affect and it was discharged Feb 14, 2006.  My Trustee has been asking
about my 2005 tax returns.  I filed my taxes late due to moving and not
receiving all my W2's.  I'm due a large refund, mostly because of the
EIC and Additional Child Credit along with paying in a bunch.  Do I need
to hand over the whole refund or just the pro rated part of what was
withheld from my wages?


Answer
The trustee will probably agree to pro rate the refund, and let you keep a percentage of the money based on how far you were into the tax year on the date that you filed bankruptcy. For example, if you filed on June 30th, (which is half-way through the tax year) you and the trustee might split it 50/50. If you filed on September 30th, the trustee would keep 3/4th's, because the tax year was 3/4th's finished on that date. The source of the money, such as EIC and Child Credit probably makes no difference to this allocation.

However, there may be even better news for you! You might be entitled to exempt some or all of the refunds. If you filed BK in Minnisota, (MN?) you might be able to protect as much as $9250, depending on what your other assets and exemptions are. Please check this out immediately with a capable local bankruptcy attorney. If you have bankruptcy exemptions available, you can file and serve an amended schedule of exemptions to claim what you are entitled to keep under the law.  

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Los Angeles Bankruptcy Lawyer Leon D. Bayer

Expertise

Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.


Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.

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