The refund from your state or federal income tax refund is not an exempt assets for the purposes of bankruptcy proceedings. This means that your tax refund can be seized by the U.S. Bankruptcy Trustee and used to pay down some or all of debts contained within your bankruptcy. As a result, you may wish to refrain from filing bankruptcy until after you have received and spent your income tax refund. While it is not advisable to blow your tax refund on a new car or a piece of expensive jewelry, it is possible to use your tax refund to your advantage, without hurting your chances for a successful bankruptcy discharge. For instance, you could use the proceeds of your tax refund to pay down an existing debt, catch up delinquent monthly utility or rent obligations, or you can even use your tax return for bankruptcy fees, or attorney fees.