In re Meyers

Summarized by Kurt Carlson , Carlson Dash LLC
15 years 5 months ago

Citation:

09-cv-0323-MJR

Tag(s):

7th Circuit

Ruling:

Debtor's income tax refund received post-petition is subject to a pro rata method of sharing with bankruptcy estate, based upon when petition is filed in a given tax year, provided income remains fairly constant through tax year.

Procedural context:

Appeal from bankruptcy court ruling and district court's affirming of decision that tax refunds received post-petition are property of the estate, subject to a pro rata by days method of calculation, and provided said refunds are not subject to remaining exemptions available to debtor, pursuant to 11 U.S.C. 542.

Facts:

Debtor, a resident of Illinois, but employed in Missouri, filed her Chapter 7 bankruptcy petition on September 25, 2007, and by that time had earned 78.6% of her total income for the 2007 tax year. Debtor received a tax refund of $3,538, repesenting federal and state tax overpayments. The Trustee claimed a pro rata share of this refund, or $2,597.60 as the portion of refund that belonged to the estate. The Debtor argued that the methodology articulated in In re Donnell, 357, B.R. 386 (Bankr. W.D. Tx. 2006) was more appropriate way of allocating which part of the refund belonged to the estate. However, Donnell required an analysis of each component of the refund to determine when the debtor possessed a legal or equitable right in that component. The Donnell court utilized that method because of the more erratic income and withholding amounts through the year, rather than a steady rate of income and withholding as was present here. Debtor, however, was still entitled to a wild card exemption of $1,624, leaving the total liability to the estate as $973.60, which the Seventh Circuit Court of Appeals has affirmed.

Judge(s):

Flaum, Wood, and St. Eve (District Judge for the Northern District of Illinois, sitting by designation)

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