I am considering chapter 7. I am not sure about the median income info because I am no longer employed and working a temp job and used my retirement to live on. My question has to do with income tax refund check. I don’t think I will be getting a refund this year because of my retirement penalty, but if I did get one would I have give to the bankruptcy courts because I filed bankruptcy?
Sheila
Jonathan Ginsberg responds: Sheila, you raise a number of points in your question – let me address one by one:
First you ask how to calculate your median income given your change in employment. When you file bankruptcy, the law requires us to look at your income over the 6 month period preceding the month you actually file. For example if you were planning on filing in December, we would look at your median income from June through November.
If your income is lower than it "normally" is because of a job loss, that’s fine. You would have an easier time passing the "median income" test. The reverse, unfortunately, is also true – if you currently have no income but had a large income during the six month look back, your median income may exceed the limit and you would have to go into a means test calculation.
Additionally if you pass the means test but now have a high salary going forward, then you might have trouble fitting into Chapter 7 because of your budget.
Secondly, you raise the issue of your tax refund. Your tax refund does count when looking at your median income. Don’t be confused – all sources of income or revenue count in a median income calculation.
Third, you raise the question about what to do about your tax refund. Your tax refund is an asset that would have to be listed on Schedule B of your petition. Depending on how much you have or will receive, your tax refund may or may not be "exempt." In Georgia, you can use 1/2 of your unused real estate exemption + your wildcard exemption and shelter up to $5,400 of cash or cash equivalent like a tax refund. A qualified attorney can help you plan the timing of your filing to preserve as much of your tax refund as possible.