Trustee Blog

Tax Refund Planning: Trustee Robert Whitmore

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Chapter 7 Riverside Trustee Robert Whitmore

Tax refunds and the end of the year.

As mentioned in a previous post, Mr. Whitmore often uses nonexempt tax refunds to pay creditors of the bankruptcy estate. The prudent bankruptcy attorney will estimate these tax refunds and protect them.

Clients coming into your office now and filing in bankruptcy in the Fall of the year have their cases conclude after the first of the year. This issue poses the problem of a potential asset of a tax refund for next year.

Advise clients about tax refunds toward the end of the year and beginning of the next year.

Your clients will say

“I do not know how much the tax refund will be?”

Then look at the last tax refund received and use that as an estimate. The tax refunds for most people are similar from year to year, so last year’s tax refund is a good prediction of what the current year’s refund will be.

Most people will be surprised how big tax refunds are especially with the “earned income credit”. People that work at low wage jobs such as hamburger stands can make $5000 and $6000 in tax refunds depending on how many children they have. These are tax refunds that the debtors wait all year for and have planned their lives around. So this tax refund is a big deal to both them and potentially to a chapter 7 bankruptcy trustee.

Practice Pointer

Be sure to list the potential tax refund for cases filed at end of year, as the hearings are held in the beginning of the year will have tax refunds that will come due during the bankruptcy case. Please exempt the “expected tax refunds” for the new year. This way the Trustee knows that there may be a tax refund and to plan to protect that refund as best as possible. If this is done at the beginning of the case, there may not be a dispute at the end of the case.



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