67. Can I Keep My Tax Refund in Chapter 13 Bankruptcy?

Tax season is here again, so you may be wondering if you can keep your refund in a Chapter 13 Bankruptcy. In most cases, you are required to turn over your tax refund to your Chapter 13 Trustee. However, there are options to keep your refund.

Your Refund Is Considered Disposable Income

A Chapter 13 Trustee uses your disposable income to repay your creditors based on your approved Chapter 13 Plan. Any income that is not used for shelter, food, or transportation is considered disposable. Since a tax refund falls outside these parameters, the trustee may argue against you keeping the refund.

Consult Your Attorney

You and your attorney are a team, so you need to speak to your attorney if you expect to receive a tax refund. This will enable your attorney to review the best options to protect your refund.

How Do You Protect Your Refund?

First, you need to show that you need the refund for specific reasons. These can include certain unexpected expenses, urgent vehicle repairs, repair/replacement for appliances, or funeral expenses.

Your attorney can draft language into your proposed plan to excuse future tax refunds from being taken. Or, your attorney can ask the court to protect your refund with a filed plan modification. This will be filed separately for every year you want to keep your refund. Your attorney will need to know which refund to keep, the exact amount, and the reason you want to keep the refund.

Still Have Questions?

The most important thing you can do is to speak with your attorney to go over the best options for your circumstances. This article only mentioned a few options, but your attorney will be able to explore if and how you can protect your tax refund. If you have not filed for bankruptcy and want more information, contact our office today for a consultation.

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Daniela Romero

Daniela Romero has been practicing law in the Los Angeles area since 1998. Ms. Romero has practiced in the areas of civil litigation, family law and bankruptcy law. She was also the staff attorney for the Los Angeles County Bar Association’s Domestic Violence Project. MORE

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