Everything you need to know about seizing a tax refund (Steuererstattung) during insolvency

What does “Steuererstattung” mean?

It is the amount the tax office (Finanzamt) returns to a person after calculating annual tax differences, such as:

• Deducting work-related expenses (Werbungskosten).

• Deducting special or medical expenses.

• Corrections of excessive pre-withholding.

Is a tax refund subject to seizure during insolvency?
Yes, generally any tax refund received during insolvency proceedings is considered an asset (Vermögen) and is added to the insolvency estate.

Why is the amount seized?
Because the goal of insolvency is to collect as many assets as possible to repay creditors as much as possible.
Therefore, the law requires transferring the tax refund in full to the insolvency administrator (Insolvenzverwalter).

What if you receive the money directly?
If the Finanzamt transfers the refund to your account, you must inform the insolvency administrator immediately.
Keeping the money without disclosure is a serious breach that may lead to revocation of the debt discharge (Restschuldbefreiung) or even criminal prosecution for fraud.

Is every refund seized in full?
In most cases: yes.

However, in some exceptional cases, a small part may be left if it is linked to direct, necessary living costs, decided individually by the insolvency administrator.

What is the relevance of the tax year?
Even if the tax year was before the insolvency started, the refund is part of the insolvency estate if it is received during the proceedings.
What matters most is the date it becomes due and is received, not the tax year alone.

How do I know what I should do?

• Consult the insolvency administrator before filing the tax return.

• Request official guidance on how refunds will be handled.

• Provide a copy of the tax return (Steuererklärung) and any tax assessments (Steuerbescheid) to the administrator as soon as they are issued.

Practical tips

• Do not spend or use any refund before the administrator’s approval.

• Keep copies of all correspondence with the Finanzamt, especially the refund notice.

• Deposit the amount into a designated account or transfer it to the insolvency administrator to avoid suspicion.

• If you are unsure which amounts are seized or exempt, seek specialized advice from a debt counseling service (Schuldnerberatung) or a lawyer.

What happens after insolvency ends?
After the insolvency period ends and debt discharge is granted, tax refunds become fully yours again.
They will not be subject to seizure in the following years.

Conclusion
A tax refund in Germany during insolvency is considered a seizable asset and is usually transferred to the insolvency estate to repay creditors. Full transparency and coordination with the insolvency administrator are essential to avoid losing the right to debt discharge or facing legal consequences.

ـ The team of writers and editors on the website strives to provide accurate information through intensive research and reviewing multiple sources when writing articles; however, some errors may appear or some information may be unconfirmed. Therefore, please consider the information as an initial reference and always refer to the competent authorities to obtain confirmed information.