Bankruptcy And The Government’s Tax Stimulus

         The tax stimulus law went into effect on February 13, 2008 when it was signed by President Bush.  The law gives a rebate to all taxpayers who file returns for 2007 and who made $3,000 or more.  It gives a rebate of $600 to the filer, $600 to the filer’s spouse and $300 for each child claimed on the return.        

      The purpose is to get us out of the recession this country is experiencing by “stimulating” the economy; giving consumers more money to spend.     

          What  does that mean if you have or are going to file a chapter 7 bankruptcy?  Generally, the bankruptcy estate includes all of your property at the time you filed (and often property that you have control over).  It usually doesn’t include property you don’t have but receive later.  A notable exception to this is an inheritance that you become entitled to within six months of filing (see 11 USC §541).      

           So, how about a tax rebate that you won’t receive until later?  If you filed for relief before February 13, 2008, it seems pretty clear that the rebate is yours – the trustee can’t claim it for the estate.  If, however, you filed after the rebate became law, then the trustee is probably entitled to receive the money when you get it to use to pay unsecured creditors.   Of course, you can wait until after you get the money; spend it, and then file.  Once again, timing is everything.   It’s best to consult a competent bankruptcy attorney in your area.