A Bankruptcy Judge in Tampa delivered an important decision regarding tax refunds in Bankruptcy. On July 20, 2022, Bankruptcy Judge CJ Delano rendered a decision regarding whether a debtor may retain a portion of a tax refund received in the amount of $5,500. The debtor claimed $3,750 of such refund as exempt. The debtor’s argument was that portion of the refund should be exempt because it represented monies that the debtor withheld from his social security benefits. Social security benefits are exempt from levy, attachment, execution, garnishment, and another legal process pursuant to 42 USC 407. Judge Delano ruled that the withholding of monies from social security benefits did not affect the exemption provided under 42 USC 407. The Bankruptcy Judge further ruled that the refund was exempt to the extent to which such monies could be traced to social security benefits.
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