Many people who want to file for bankruptcy protection do not have the money to pay the fees, so they wait until after they receive their income tax refunds to use the refund to pay for the bankruptcy filing.
In a Chapter 7 case, if you file for bankruptcy before you receive the refund, when the refund is received it may have to be turned over to the bankruptcy trustee to be used to pay your debts unless you can exempt it. An "exemption" is something that you can use to protect your assets and money from being turned over to creditors and the bankruptcy trustee. Exemptions are listed under State or Federal law, and each state is different as to how it treats its exemptions. In the state of New Hampshire where I practice, New Hampshire allows you to take either the Federal or State exemptions, whichever is most advantageous to you. Many people choose the State exemptions, because in New Hampshire, we have a $100,000 homestead exemption which protects up to $100,000 of equity in your home.
In a Chapter 13 case, in New Hampshire, if you file for protection under Chapter 13, every income tax refund in excess of $1200 must be turned over to the Chapter 13 bankruptcy trustee to be used to pay the debts under your Chapter 13 plan.
Lesson learned: Many people wait until after they have received their tax refund to file for bankruptcy protection.