When you file for bankruptcy in Florida, you are required to provide the bankruptcy trustee with a copy of your latest income tax return. If you file for Chapter 13 bankruptcy, you are required to provide copies of all income tax returns filed while the case is pending. If you are due a refund, it may or may not be yours to keep.
Any tax refund you have a claim or right to is your personal property. When you file for bankruptcy in Florida, a bankruptcy estate is created. All of your property, including the right to claim a tax refund, becomes property of the bankruptcy estate. In a Chapter 7 bankruptcy, the trustee controls the property of the estate and uses it to pay your creditors. In a Chapter 13 bankruptcy, your income, including any tax refund, is the property of the bankruptcy estate and is used to fund your repayment plan.
The only way to keep your tax refund out of your Chapter 7 bankruptcy estate is to claim it as exempt. All states and federal Bankruptcy Code identify exemptions that can be used to keep property safe from creditors. Some states allow you to choose between federal and state exemptions, but Florida does not. Generally, when you file for bankruptcy in Florida, you can only use Florida exemptions to protect your tax refund.
While Florida law does not have a specific exemption for tax refunds, it does provide exemption categories that a tax refund might fit into. If you can find a category to properly claim your tax refund as exempt, you can keep the refund. Florida exemptions that may cover a tax refund include the $1,000 personal property exemption, earned income tax credit exemption and, if you are not claiming your home as exempt, the $4,000 wildcard exemption.
If you included your tax refund when calculating your Chapter 13 repayment plan, you will likely keep your refund because it has already been factored into your plan and monthly payment. However, if it was not included, it will belong to the trustee unless your plan pays all of your creditors in full. But even if the refund belongs to the trustee, you may receive court permission to use it to pay for unexpected expenses, such as medical bills or home repairs, by filing a motion with the court.
- Online Sunshine: The 2012 Florida Statutes: Homestead and Exemptions
- American Bankruptcy Institute: Interactive Bankruptcy Code and Rules § 521: Debtor's Duties
- United States Courts: Bankruptcy Basics
- Ruff & Cohen: Florida Bankruptcy Exemptions
- Law Office of Jonathan T. Mitchell: IRS Tax Refunds Are Afforded Limited Protection Under Bankruptcy Law
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