What Happens to My Tax Refund in a Chapter 7 Bankruptcy?

If you file a Chapter 7 bankruptcy case, you may need to turn over some or all of your tax refund to your Chapter 7 Trustee, depending on when you file your case. A tax refund is an asset in a bankruptcy case, and the trustee will take your tax refund if it is large enough, and will use it to pay towards your debt. But, the amount of your tax refund that the trustee can take depends on when you file your bankruptcy case, so timing is important! For example, lets say you file your bankruptcy case on September 1, 2022. Since you filed your Chapter 7 bankruptcy case 66% of the way through the year 2022, the trustee can take 66% of your 2022 tax refund that you will receive in the Spring of 2023 when you file your tax returns. If you file your bankruptcy case later, say on November 25, 2022, you will be filing 90% of the way through the year, so the trustee can take 90% of your tax refund. So, the sooner in the year you file your bankruptcy case, the lower the amount of your tax refund the trustee can take from that year.