I spent my tax refund and the chapter 7 trustee revoked my discharge. What can I do?

When you file a chapter 7 case, the chapter 7 trustee normally orders you to turn over your upcoming tax refund.  While you’re waiting for the tax refund, the court will issue a normal discharge in your case, and your debts are written off.  This does not mean that the case is closed.

The trustee still keeps the case open to go after the refund money.  If you fail to turn it over, then he will file an adversary proceeding to revoke your discharge.  If you don’t turn over the money then, he gets a money judgment against you, and your chapter 7 discharge is revoked, meaning that you still owe all of that money to the creditors.

At this point, what you should do is work out an arrangement with the trustee to get him the tax refund money, un-revoke the discharge (file a motion to set aside his default judgment in the adversary proceeding for revocation of discharge), and then be done with it.

If you can’t do this, you can’t file a new chapter 7 on those same debts.  However, you can still discharge those debts in a chapter 13.  If you originally qualified for a 7, then your 13 is probably only going to require payments to the chapter 13 trustee of $100 a month for 3 years, but you’ll lose all but $1,000 a year of your tax refund for your next three years of tax refunds.

So, it’s best to work it out with the chapter 7 trustee.  If you can’t, then you can still file a chapter 13 to wipe out those debts.

This is not legal advice.  If you need help, go to www.robertspaynelaw.com.

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