18 Feb What Happens to My Tax Rebate if I File Bankruptcy?
Congress has passed a stimulus package which will offer most taxpayers a tax rebate. Most of us are supposed to receive the rebate by May of this year. But how will that affect you if you file bankruptcy?
If you are already in a bankruptcy, the tax rebate may have no affect on you at all. If you are planning to file a bankruptcy in the next few weeks, before you receive your rebate, the tax rebate is a potential asset that should be listed on your bankruptcy paperwork. If you are filing a Chapter 7 case, you may be required to turn all or part of the rebate over to your Chapter 7 trustee, unless it can be claimed as exempt under the laws applicable in your jurisdiction. In a Chapter 13, it may be a small part of calculating your payment to the trustee. Consult with your attorney about what to do with the tax rebate when you receive it.
If you file a bankruptcy in the six months after you receive your tax rebate, the rebate will be added to your other income for purposes of the means test. The tax rebate is supposed to arrive in May, shortly after most people receive their normal tax refund. If the numbers in your means test are close, it may be that the tax rebate (especially if combined with a tax refund at about the same time) will be enough to change the outcome. Many times such a problem can be resolved simply by waiting to file your case, but if you have a pending foreclosure or other legal action, you may not have that luxury. It may be wise to check with your attorney now, so you can plan for that eventuality.
It appears that the tax rebate will be payable to any taxpayer who files a return by April 15, 2008. It may well be that if you file for an extension, you won’t receive a rebate, or it will be payable later in the year. Because of the impact that such delays may have on your bankruptcy disclosures and the means test, it is important that you let your attorney know if such is the case.
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