If you have received a tax refund from the government (or if you are due a refund), and you intend to file a St. Louis bankruptcy, it is important to know several things. Depending on which chapter of bankruptcy you file, the bankruptcy Trustee may wish to use the refund to pay towards your creditors.
In a St. Louis Chapter 7 bankruptcy, tax refunds are treated as an asset, and may therefore be used to pay towards the unsecured creditors that are to be discharged in your case. So if the tax refund that you receive from both the state and federal governments is large, then you can probably expect that (at least for the current year) you will most likely have to surrender the refund. What constitutes a ‘large’ refund is up for debate, but if the refund exceeds $1,000 in value, then there is a good chance the Trustee will want it. This does not mean that if you receive a tax refund that exceeds $1,000 that you will have to hand it over to the Trustee. It means that if you file a Missouri Chapter 7 before filing your taxes (or if you have filed your taxes and are still in possession of the refund), then there is a good chance the Trustee will demand turnover of the refund.
In a St. Louis Chapter 13 bankruptcy, the Chapter 13 Trustee will expect you to surrender any tax refund money that you receive above $1,250.00 for an individual filer, or anything above $1,500 for a joint filing. For example, if you were to receive a tax refund in the amount of $3,000.00 while you were inside a Missouri Chapter 13 bankruptcy repayment plan, the Trustee would want you to turn over $1,750.00. This amount would then be applied toward the repayment plan.
In the end, the St. Louis bankruptcy attorneys at The Bankruptcy Company want you to keep as much of your tax refund as possible. But making sure that you do requires a level of experience and knowledge that not all law firms possess. Our staff is ready to explain the role that tax refunds play in a bankruptcy, and determine whether your refund is at risk of being taken.