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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31787
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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What is the formula to figure out how much of my next years

Customer Question

What is the formula to figure out how much of my next years tax return the trustee will be able to take? I am plannin on filing a chapter 7 bankruptcy at the emd of may. Thanks
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 4 years ago.
Hi - my name is Kirk and I'm a Bankruptcy litigation attorney. Thanks for your question.

In a Missouri, chapter 7 bankruptcy case tax refunds are not specifically protected. However, Missouri debtors can take advantage of a wildcard exemption (up to $1250) that could be used to protect at least a portion of their tax refunds.

Thus, the trustee can take hold of your refund as long as you're in bankruptcy.
Customer: replied 4 years ago.
I do understand that to a sense, i have a couple hundred of my wildcard left that i will claim on my tax return, and the trustee will get the rest for this year 2013 (due to an identity theft issue i am still waiting for my tax return for this year). However i will not be in my bankruptcy at tax time next year, so how much of my next years tax return can the trustee take?
Expert:  Roger replied 4 years ago.
If you're out of bankruptcy, then your entire refund should be payable to you.
Customer: replied 4 years ago.
I thought i had read something about what percentage of next years tax return the bankruptcy attorney could take based on what month you file the previous year. So as soon as I get my discharge letter from the court, i dont have to worry about my tax refund for following years getting seized by trustee?
Expert:  Roger replied 4 years ago.
Income acquired AFTER the filing date is excluded from your bankruptcy, so income made the year after filing should not be subject to your bankruptcy or the trustee.
Customer: replied 4 years ago.
So income made after the month of may, which is june through december, wont be able to be touched by the trustee. However the months of january through mays income is subject to be seized by the trustee. So as my original question, whay is the formula or percentage of next years tax return the trustee can take, since he will be entitled to the months income tax refund of january through may.
Expert:  Roger replied 4 years ago.
There's no formula - only the wild card exemption.
Expert:  Roger replied 4 years ago.
Hi - -

I see that you rated the last response as poor, and I assume it's because there's no formula to determine this. However, there's no formula per se.

If you have expected income from a tax return for the year that you file, then you would have to list that as an asset and then claim your exemption to those funds. You can base your expected refund on what you've received back over the past 2-3 years.

However, you just have to claim the exemption when you file even though you haven't received the money yet. Hopefully, you can come up with enough exemptions to cover the 5 months that would be included in your filing.

Here's a good link you can read:
Expert:  Roger replied 4 years ago.
Here's the way it works:

For the year before bankruptcy, any unspent tax refunds go to the estate because the refund is the debtor’s money that was unnecessarily paid to the IRS. It is treated like cash or money in a bank account.

For the year of bankruptcy, a tax refund based on income you earned before you file for bankruptcy goes to the estate. However, you can keep part of the refund to the extent that the refund is based on income earned after the filing date.

For the tax year after bankruptcy, you keep the full refund.

I hope this helps.