David Leibowitz points out  at the Bankruptcy Law Network that the debtor’s right to a tax refund is an asset of his bankruptcy estate.  Depending on the exemptions available, the debtor may be entitled to keep it, or it may have to be turned over to the trustee.

A common misconception is that the refund is an asset only after the taxpayer has filed his return and calculated what he should get back.  Wrong!  The right to money exists as soon as the tax year is complete; on January 1, 2009, a taxpayer who has overpaid is entitled to a refund.

For these purposes, it is meaningless that the taxpayer doesn’t know how much he is owed until the return is prepared.  So someone who files for bankruptcy in January may be gambling with the refund to be “discovered” when the return is filed.

The other side of the coin is that the taxes for 2008 are legally due on January 1, even though they are not overdue until April 15th.  I have advised a number of clients expecting a 2008 liability to wait to file their Chapter 13 cases until 2009, so the tax debt will be a prefiling debt and payable through the Chapter 13 plan.