In the State of Tennessee, each individual who files bankruptcy is allowed a $10,000.00 personal property exemption. This exemption encompasses all of your personal property like furniture and household goods, vehicles, as well as cash or other accounts of value. The exemption prevents a bankruptcy trustee from utilizing these assets to pay your creditors. If you are married and are filing a joint case, each spouse is entitled to a $10,000.00 personal property exemption, thus your total exemption is $20,000.00.
A tax refund is considered an asset in a Bankruptcy case. If you are filing a Chapter 7 liquidation, your refund needs to be included in your exemption in order for you to keep it. For example, if you have $5,000.00 worth of personal property and your tax refund is $5,000.00, you should be able to keep all of your refund because it is within the $10,000.00 exemption.
However, if you have $4,000.00 worth of personal property and your tax refund is $8,500.00, you will likely have to surrender part of your refund to the bankruptcy trustee. In a Chapter 13 repayment plan, you must pay back a certain amount to your creditors in order for you to keep receiving your tax refunds. This amount is based on a variety of factors and must be determined by an experienced attorney. In most cases, clients may keep their tax refunds as long as they make their payments in their bankruptcy plan.
If you have further questions about filing bankruptcy and protecting your tax refund this year, call our office at 615-255-2893 to speak with an experienced attorney, or visit the Contact Us page.