What Happens to Your Tax Refund if You Declare Chapter 13 Bankruptcy?

When you file for a Chapter 13 bankruptcy, the trustee may be able to take your tax refund and apply it to the debt that you owe. Some individuals filing for Chapter 13 bankruptcy include their anticipated tax refund in their income information. In some cases, the repayment plan established by the bankruptcy court may specify that your tax refunds will be turned over to the trustee. Your bankruptcy attorney can help you review the repayment plan and explain anything that appears unclear.

Sometimes, a Chapter 13 trustee will review the repayment plan every year and the plan may be adjusted to include your tax refund, if it did not previously include it. Depending on which district you reside in, you may be able to keep unexpected tax refunds, provided that you are current on your court-ordered payments.