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Tax Refunds, Lawsuit Recoveries, and Inheritances

Posted by on in General

If the state or federal government owes you money for a tax refund that you have not yet received, this is considered to be an assetowned by you similar to money in your bank account. Assets should be disclosed in bankruptcies. You are then allowed to exemptor protect those assets within certain dollar limits depending on what the asset is, and depending on how many people own it.

In some Chapter 13's, but not all of them, you might be required under your plan to pay in part of future tax refunds to pay creditors if they would not be paid in full otherwise. You should ask the lawyer about this if you are filing Chapter 13.

In either Chapter 7 or Chapter 13, disclosing assets is the proper way and best way to protect them. Hiding or failing to disclose assets can result in the loss of protection that you would otherwise have, and creditors and Trustees can make problems for you if they allege that you failed to disclose something that should have been disclosed.

Similarly, if you have a claimagainst someone else, regardless of whether you have filed suit, and regardless of whether you have retained a lawyer, this claimis also an asset that should be disclosed and exempted in a bankruptcy. It doesnt matter if the exact value of the claim is known or not. Valuecan be listed as unknown. Personal injury, products liability, workers compensation, and employment discrimination are common examples of this type of claim. Claims should be disclosed whenever they arise, even after a bankruptcy has been filed.

If you are due to inherit money or property from someone who has died, your share is an asset, even if the inheritance has not been distributed. If someone dies within 180 days (six months) after you file, that inheritance is also an asset, and your share should be added to the schedules and exempted for your protection.

The disclosure of assets does NOT necessarily mean that you will lose them. Assets can be protected within limits in a Chapter 7 by exemption, and you are not subject to losing assets in Chapter 13 at all (even though it might or might not impact the minimum amount of your monthly payments). A Chapter 13 is a voluntary proceeding. If the burdens of continuing the case outweigh the benefits, you can just terminate the proceeding. Thus, people very seldom lose anything that they dont want to lose when they bankruptcy, assuming they consult an attorney about the rules in advance to make informed decisions.

Each case is different. In the vast majority of cases, debtors safely own assets, disclose assets, and protect them. If it turns out that you are subject to losing something that you dont want to lose, the best approach is to discuss it specifically with the lawyer ahead of time. The best answer often involves balancing benefits and burdens in that particular case. This will eliminate unnecessary worry about losing assets.

Please call us at 678-519-4143 today to discuss your specific situation. 

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H. Brooks Cotten graduated from Cumberland School of Law in Birmingham, AL in 1981.  He earned an MBA at Monterey Institute of International Studies in California in 1987. He has a reputation as a knowledgeable attorney who is not afraid to litigate close legal issues on your behalf.

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