Is The Child Tax Credit Exempt In Bankruptcy In Colorado?
As you may have learned from researching bankruptcy, when your attorney files your bankruptcy petition, an estate is created. Within the estate there are – broadly speaking – two kinds of property: exempt and non-exempt. Exempt property is protected by state and federal law and can not be sold by the bankruptcy trustee for the benefit of your creditors. Non-exempt property is not protected, and the trustee can sell that property and distribute the proceeds to your creditors.
Colorado Revised Statute 13-54-102(1)(o) provides an exemption for the child tax credit and states: “The following property is exempt from levy and sale under writ of attachment or writ of execution . . . The full amount of any federal or state income tax refund attributed to an earned income tax credit or a child tax credit[.]”
The 10th Circuit Court of Appeals Bankruptcy Appellate Panel this week released its decision in two cases clarifying what exactly the Colorado child tax credit allows. In these cases, the debtors exempted the portion of their federal income tax refunds attributed to the child tax credit, but the trustee objected. The bankruptcy courts sustained both objections, concluding that the child tax credit does not constitute property of the estate and that because the credit itself is non-refundable, none of the refunds can be “attributed” to it.
The Bankruptcy Appellate Panel reversed the bankruptcy courts’ decisions, reasoning that had the debtors not claimed the child tax credit, their tax burden would have been higher, and thus their tax refund lower.
Talk To An Experienced Bankruptcy Lawyer In Denver, Colorado
One of the biggest concerns that people have when they come to see me for their initial consultation is that they are going to lose their property. In most cases, my clients keep all of their property. While tax refunds can generally be claimed by the trustee, certain exceptions exist. If you are thinking about bankruptcy, consider talking with a Colorado bankruptcy attorney to see what your rights are.
