Can I Keep My Tax Refund in Chapter 13 Bankruptcy?
In a Chapter 13 bankruptcy, a person must pay all of their disposable income into their Chapter 13 repayment plan. Disposable income is any income that is not used for reasonable and necessary expenses such as shelter and food. When you receive a tax refund during a Chapter 13 bankruptcy, the trustee may consider those funds as disposable income if they weren’t included in the income and expense calculations used to pay your Chapter 13 plan. The tax refund can be considered a surplus by the trustee and therefore you may be required to put that money towards your repayment plan. If you are able to show that the trustee is incorrect, then the court may let you keep the money.