What Happens to Income Tax Refunds in Bankruptcy?
Now that we are in tax season, many Oak Park residents are filing their income tax returns and some are expecting refunds. When you are anticipating an income tax refund but are also thinking about filing for personal bankruptcy , it is important to learn more about how tax refunds are handled in a bankruptcy proceeding. In other words, will you get to keep your tax refund if you file for consumer bankruptcy ? There is no straightforward answer to that question since the answer depends on a number of different factors. We will say more about how income tax refunds are treated in a bankruptcy case. Timing of When You Earned the Income Tax Refund The first question you should ask when determining whether you will get to keep your income tax refund when filing for Chapter 7 bankruptcy is when you earned the income that was taxed and for which you are receiving a refund. Under the U.S. Bankruptcy Code , any refund that results from income earned and taxed prior to the date that you f...