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Why did Treasury keep my income tax refund when I'm in bankruptcy?

Treasury's ability to withhold a taxpayer's income tax refund is determined by the chapter under which the bankruptcy was filed:
  • Chapter 7—The refund is held until a discharge is issued.
  • Chapter 11 (Business Filed)—Bankruptcy will offset an assessed officer's refund when:
    1. The business has defaulted in chapter 11 plan payments.
    2. The Pre-Petition debt exists and is not included for payment through the business bankruptcy.
    3. The confirmed plan will offset for Post Confirmation debt.
  • Chapter 11 (Corporate Officer filed)—If a plan has been confirmed and there are post-confirmation debts, Treasury will apply corporate officer refunds to post-confirmation assessments.
  • Chapter 13—Income tax refunds are returned to taxpayers.