So you thought that they would at least let you keep your tax refund if you filed bankruptcy right?  Wrong, if you filed a Chapter 13 or if you didn't plan your Chapter 7.  If you filed a Chapter 7 bankruptcy before you got your tax refund you may lose it in a Chapter 7 if you don't have enough exemptions to cover the amount of a refund.   The Kentucky exemptions are large and Kentucky debtors rarely lose tax refunds in a Chapter 7.  But persons in Indiana often lose tax refunds because their exemptions are smaller.  If you file a Chapter 7 Bankruptcy after you get your tax refund and after you have spent it, there is nothing for the Trustee to take.  

You must file annual budgets and tax returns with the Chapter 13 trustee in Kentucky.   If you file your tax returns after you file a Chapter 13 you will owe not only income tax debts for those years but the interest will continue to accrue while you are in the plan.   That is why timing of a bankruptcy is critical.   If you file a Chapter 13 in Ky you will normally lose your tax refund in all the years that you are paying back the Chapter 13 bankruptcy unless it is a 100% plan.  

Whenever you file a plan that pays over 70% the plan is assumed to be filed in good faith.  Filing a 100% repayment plan avoids the requirement of losing refunds and filing annual budgets.   However, that increases you plan payments.  Often the best approach is to simply make certain that you don't have a tax refund to lose at the end of the tax year by claiming more exemptions so that your payroll deductions are less.   

Timing and planning your bankruptcy is everything and this is why you need good legal advise so your Chapter 13 is filed properly.  You need someone that knows this area of law completely and that will help you to plan this to your best advantage - - never do this yourself! 

The Bankruptcy Manual discusses how to avoid losing your tax refund.   Download your free copy.