I have received several emails over the past few weeks asking about the impact of the $600 to $1,200 check that many of us will receive in May as part of the Bush stimulus package. My colleague, Dana Wilkenson explains the impact in her post on the Bankruptcy Law Network blog:
If you are already in a bankruptcy, the tax rebate may have no affect on you at all. If you are planning to file a bankruptcy in the next few weeks, before you receive your rebate, the tax rebate is a potential asset that should be listed on your bankruptcy paperwork. If you are filing a Chapter 7 case, you may be required to turn all or part of the rebate over to your Chapter 7 trustee, unless it can be claimed as exempt under the laws applicable in your jurisdiction. In a Chapter 13, it may be a small part of calculating your payment to the trustee. Consult with your attorney about what to do with the tax rebate when you receive it.
If you file a bankruptcy in the six months after you receive your tax rebate, the rebate will be added to your other income for purposes of the means test. The tax rebate is supposed to arrive in May, shortly after most people receive their normal tax refund. If the numbers in your means test are close, it may be that the tax rebate (especially if combined with a tax refund at about the same time) will be enough to change the outcome. Many times such a problem can be resolved simply by waiting to file your case, but if you have a pending foreclosure or other legal action, you may not have that luxury.
What if your Chapter 13 plan provides that all tax refunds are to be paid to the Chapter 13 trustee? I have not heard anything directly from the trustee but I suspect that the Chapter 13 trustee will have his/her hand out. I will see if I can ferret out the trustee’s position prior to May – I wonder if one could amend his/her petition to declare the $600 or $1,200 check exempt pursuant to any unused exemption.
I certainly hope that Chapter 13 trustees can be persuaded to forego any seizure of the Bush economic stimulus checks. The purpose of this rebate is to help the economy by boosting consumer spending – it seems to me that given how difficult bankruptcy budgets are to maintain it would be nice to give bankruptcy debtors a little breathing room.