Peoria, AZ asked in Bankruptcy and Tax Law for Arizona

Q: What would a trustee need or do with a tax refund collected on a closed chapter 7 case?

My Ch. 7 BK closed in Aug of '16. My '16 refund was filed in Feb of '17. The trustee had my federal refund sent directly to him and is still requesting my state refund be sent. If the BK is closed, why would he be able to hold those funds and what would they be used for?

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1 Lawyer Answer
Michael Gerity
Michael Gerity
  • Bankruptcy Lawyer
  • Phoenix, AZ
  • Licensed in Arizona

A: A tax refund for the 2016 tax year would represent an overpayment of taxes throughout that year. As such, you were "owed" that money, or at least a portion of it, as of the time of your filing, which makes it part of your bankruptcy estate. The trustee would use any such estate funds to make additional payments to creditors, and can reopen the bankruptcy for that purpose.

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