This paper discusses a Chapter 7 trustee’s right to a pro-rated portion of a debtor’s tax refund.
Substantively, every conceivable interest of the debtor - future, non-possessory, contingent, speculative, and derivative - is within the reach of section 541 of the Bankruptcy Code. This includes the contingent right to an income tax refund of excess withholdings for the year in which the bankruptcy petition was filed. The valuation of the portion of the tax refund that is received after the petition date is determined on a calendar proration. The paper also discusses in detail the procedural aspects of collecting a debtor’s pro-rated tax refund, as well as failed arguments by debtors in an attempt to prevent the trustee from collecting a pro-rated portion of their refund.
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