Can I Keep My Tax Refund If I File Bankruptcy?

In the Middle District of Florida, the courts have generally held tax refunds should be apportioned according to a filing spouses contribution to the taxable income according to IRS guidelines.  Obviously, this is only applicable when only one spouse files.  

Well, I have some good news.  Recently the Eleventh Circuit issued a ruling regarding this.  If you are married, filing without your spouse, make sure your attorney knows of the following case.  You may be able to keep your tax refund.

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Stevenson v. Uttermohlen (In re Uttermohlen), Case No. 13-10289 (11th Cir. Aug. 9, 2013) (unpublished) (per curiam).

Ruling: 

The United States Court of Appeals for the Eleventh Circuit affirmed the judgment of the United States District Court for the Middle District of Florida, and ruled that the debtor's right to a tax refund is exempt as tenancy-by-the-entireties property under 11 U.S.C. § 522(b)(3)(B) and Florida law, even where the refunded tax contributions relate solely to the debtor's income, and the non-filing spouse does not work.

Procedural context: 

The United States Bankruptcy Court for the Middle District of Florida (Catherine Peek McEwen, Bankruptcy Judge) sustained an exemption of tax refunds over the Chapter 7 trustee's objection. On appeal, the United States District Court for the Middle District of Florida (Virginia M. Hernandez Covington, District Judge) affirmed the Bankruptcy Court's ruling. The Chapter 7 trustee then appealed to the United States Court of Appeals for the Eleventh Circuit.

Facts: 

Debtor sought to exempt a $10,668.00 tax refund as tenancy-by-the-entireties property. The Chapter 7 trustee objected, arguing that (i) the refunded tax contributions related solely to debtor's income, business income, and losses, (ii) the non-filing spouse did not work outside the home, and (iii) the tax refund does not qualify as tenancy-by-the-entireties property, but should be apportioned on the basis of each spouse's income. The Bankruptcy Court found that all unities required to to own property as tenants-by-the-entireties existed on the date the debtor filed bankruptcy, and overruled the Chapter 7 trustee's objection.

Judge(s): 

 Barkett, Marcus, Hill