Can they hold your federal return in chapter 7 bankruptcy?

That really depends on how you ask that question. When one files for Chapter 7 bankruptcy, he/she is appointed a trustee by the court. This trustee is then in charge of overseeing your estate in an effort to eliminate any debt highlighted in the bankruptcy. By doing this, they need to liquidate as many of your assets needed to pay back your creditors. These assets can be anything from sofas, televisions, cars, etc. When the trustee is beginning to run out of plausible assets to liquidate, they can go after you tax refund, if you were given one. Since he/she has the power to have full control of your estate, he has control of your tax refund. So with that in mind, if you file for any sort of bankruptcy, then expect your tax refund to be used for that bankruptcy in some way.