U.S. Bankruptcy Court Determines Tax Refund to Be a Joint Asset

Summary

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How should a joint income tax refund be distributed where one spouse has filed for bankruptcy and the other has not? Is the bankruptcy estate entitled to one half of the refund or is the refund proportionate to the income earned by each spouse?

Judge Carl L. Bucki wrestled with these questions in In re Clyde B. Barrow before the U.S. Bankruptcy Court for the Western District of New York. Citing case law that has varied in its approach, Bankruptcy Judge Bucki concluded that the refund was a joint asset that belonged equally to the non-debtor spouse and the debtor's bankruptcy estate.

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Extract

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U.S. Bankruptcy Court Determines Tax Refund to Be a Joint Asset

Background

Clyde Barrow filed an individual petition for Chapter 7 relief on March 22, 2001. Among his outstanding debts was a $3,821 obligation to the Internal Revenue Service for incomes taxes due for 1995, 1996 and 1997. For each of these years, the basi...

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