I have a client who previously filed for Chap 7. Client owns an S-corp which that had money left in the account at the end of the tax year. The bankruptcy Trustee filed a motion seeking all the money in the business account at the end of tax year. However, the Chap 7 was filed before the year end.

Can the bankruptcy Trustee make a vaild claim on money in the business account of S-Corp? Also, how do taxes affect this bank balance? If the money was pre-tax then will the client have to release the money and then pay the taxes on this bank balance?

Future income can be garnished and the bankruptcy court can and will factor in the taxes associated with the in come.