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  1. #1

    Default EITC and Child Tax Credit in Bankruptcy

    My question involves bankruptcy in the state of: Ohio

    Are the EITC and Child Tax Credit exempt from creditor claims in Chapter 7 bankruptcy?

  2. #2
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    Default Re: EITC and Child Tax Credit in Bankruptcy

    In Ohio, the nonrefundable portion of the child tax credit is not exempt. In re Zingale, 693 F.3d 704 (6th Cir. 2012). That is, the portion that is used to offset tax liabilities is non-exempt, but if you are eligible for a portion of the CTC to be included in your tax refund, that portion is exempt. (You may still be able to exempt it under the wildcard exemption.)

    An Ohio bankruptcy court recently held the entire Earned Income Tax Credit to be exempt. See In re Yost, Bankr. Court, ND Ohio 2014. That is consistent with the approach taken in many other jurisdictions, although for Ohio it's not as authoritative as the appellate decision in Zingale.

  3. #3

    Default Re: EITC and Child Tax Credit in Bankruptcy

    What part is non-refundable? Say someone's refund is $10,000. $2500 of it through child tax credit, $2500 through federal taxes and the rest through earned income credit; what part would be exempt?

  4. #4
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    Default Re: EITC and Child Tax Credit in Bankruptcy

    You would need to know the amount of the person's tax obligation. Click through and read Zingale.
    Quote Quoting In re Zingale, 693 F.3d 704 (6th Cir. 2012)
    In this case, because they had four qualifying children, the Zingales were entitled to a $4,000 CTC, of which $2,903 went to reduce their tax liability to zero and the remaining $1,907 they received as part of their tax refund pursuant to § 24(d).[2] The question is whether the entire $4,000 amount can be claimed as an exemption, or only the $1,907 amount refunded to the Zingales under § 24(d).
    The court held that the exemption only applied to the amount actually refunded (the refundable portion), not the amount applied to the tax obligation (the non-refundable portion).

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