Will I Lose My Tax Refund in Chapter 7 Bankruptcy? (Florida 2026 Guide)

For many Florida families, the annual IRS tax refund is the biggest check they receive all year. It’s money earmarked for car repairs, catching up on bills, or buying clothes for the kids. But if you are considering filing for bankruptcy, you need to know a hard truth: The Bankruptcy Trustee considers your tax refund an asset.

If you file at the wrong time or without a plan, the Trustee can take that money to pay your creditors. However, with the right strategy and the help of Juan Burgos Law, we can legally protect your refund in the vast majority of cases.

Why Does the Trustee Want My Refund?

Even if you receive the check in February or March 2026, the law considers that you “earned” that refund pro-rata throughout 2025 while you were working. Therefore, if you file for bankruptcy mid-year, a portion of that future refund belongs to the “Bankruptcy Estate.”

The “Pro-Rata” Rule Explained

If you file your Chapter 7 case on June 30th, you have worked for exactly half the year. Therefore, the Trustee can claim 50% of the tax refund you will receive next year, because that half was “earned” before you filed.

How to Protect Your Money in Florida

Fortunately, we have legal tools to stop the Trustee from taking your check:

1. The Earned Income Tax Credit (EITC)

This is the most powerful protection for working families. Under Florida law, any portion of your refund that comes from the Earned Income Tax Credit (EITC) is 100% exempt. The Trustee cannot touch it, no matter how much it is.

2. The “Wildcard” Exemption

If you do not own a home (or if you choose not to use the homestead exemption), Florida allows you to use a “Wildcard Exemption” of up to $4,000 per person ($8,000 for married couples filing jointly). You can apply this exemption directly to your tax refund to keep it safe.

3. The “Spend Down” Strategy

If your refund is too large to protect with exemptions, the best strategy is often to wait. We may advise you to receive the refund and spend it on necessary expenses before we file your case.

Approved “Spend Down” Expenses:

• Catching up on rent or mortgage.
• Car repairs or maintenance.
• Medical or dental care.
• Groceries and household supplies.
• Paying your bankruptcy attorney fees.

What NOT to Do: Do not use the money to pay back family members (this is a “preference payment” and the Trustee can sue your family to get it back) or buy luxury items.

Chapter 13 and Tax Refunds

In a Chapter 13 case (reorganization), the rules are stricter. The Trustee generally considers tax refunds to be “disposable income” that should go to your creditors. However, we can often file a motion to let you keep the refund if you need it for a specific, necessary expense, like replacing a broken appliance or fixing your car.

Timing is Everything

Don’t lose thousands of dollars just because you filed a week too early. The timing of your bankruptcy petition is a strategic decision.

At Juan Burgos Law, we review your last two years of tax returns during your free consultation. We calculate exactly how much of your refund is at risk and design a plan to protect it.