Bankruptcy

6th Circuit Orders Turnover of Tax Refund

By Bill McLeod, Esq.

The Bankruptcy Appellate Panel in the 6th Circuit affirmed an Ohio Bankruptcy Court order requiring the debtors to turn over their tax refunds to the chapter 7 trustee. The debtors filed their chapter 7 case in March 2005 and their meeting of creditors was approximately two months later. By the time of the meeting, the debtors had not yet filed their 2004 tax returns. The trustee advised the debtors that any refunds were to be turned over to the trustee upon receipt, and the debtors signed an acknowledgment of the instruction.

The tax returns were filed in July and the debtors received approximately $4,000 in refunds. The debtors claimed that their bankruptcy attorney advised them that they could exempt approximately $1,600 of the refund, and the debtors sent their counsel a check for the difference. Debtors also provided bankruptcy statements and tax returns to their attorney. Debtors were under the belief that their attorney would forward the check to the chapter 7 trustee.

Full post as published by McLeod Law Offices on March 08, 2008 (boomark / email).