Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
In the case In Re: Renee Marie Martin #08-46189-DML, the court determined that the income tax refund belonged to the spouse who was working. Since the non-working spouse is the one who filed a Bankruptcy, the Bankruptcy court was not entitled to the refund, which belonged to the working, non-filing spouse.
If a working spouse does file a Bankruptcy, the Bankruptcy court is entitled to the refund, per Bankruptcy Stat. 541(a)(2)(A). It does not matter that the non-working spouse will also be filing.
In other words, if you and your spouse file a Bankruptcy, the court will be entitled to have the entire refund.
A better way to keep an income tax refund is to file a Bankruptcy after the refund is received and spent.
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