The concept of exempt and non-exempt property is particularly pertinent in Chapter 7 bankruptcy proceedings, in which all non-exempt property is liquidated in order to provide some payment toward priority debts before the debtor receives a complete discharge, or relief from, all debts that are eligible for discharge under federal bankruptcy laws. While state laws differ to some degree as to the types and amounts of exempt and non-exempt property, refunds from the filing of state and/or federal tax returns are not exempt property for bankruptcy purposes. This means that if you are entitled to a state and/or federal income tax refund, you can expect the proceeds of that refund will be liquidated and applied to your priority debts, which typically include secured debts as opposed to unsecured debts.