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Nassar Law blog

Can I keep my tax returns that I received during my bankruptcy?
31 March 2016

This answer depends on what other assets and available exemptions the debtor has and whether the plan is a Chapter 7 petition for relief.

All assets and liabilities of the debtor must be listed. Tax returns are considered an asset and thus must be disclosed on Schedule B. Further, all assets become part of the bankruptcy estate and subject to sale/distribution by the assigned bankruptcy trustee unless properly exempted.

In a Chapter 7 case, tax returns can be protected typically using one of the 703 exemptions known as a “wild card” exemption. However, the wild card exemption is not infinite and can only be distributed to so many assets to protect/exempt. This requires proper planning and proper exemptions to be applied to avoid losing such tax returns.

In a Chapter 13 case, most tax return refunds can also be protected similarly to those in a Chapter 7 bankruptcy. However, in a Chapter 13, certain other conditions apply depending on whether the plan is deemed a “100%” repayment plan or not and whether the trustee would require pledging of such funds.

Filing for bankruptcy is a complex process. Further, determining whether to exempt certain assets or if such assets can be exempted is difficult and requires planning before filing of a bankruptcy to avoid losing such assets. Thus, it is crucial that you select a highly skilled bankruptcy attorney. I make it my goal to provide each client the dedicated time and experience to assist the client with his/her bankruptcy.

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