Income tax refunds

[GeorgiaFarmer]

If you are not in a 100% payback and the trustee takes your income tax refunds, will they reduce the number of months you pay back or are they in addition to your 60 monthly payments?

[broncho14]

I think it depends on the trustee and the judges in the district that you live in. In my district the trustee takes your income tax return and it shorterns the amount of time that you are in the plan. I know in the other district in my state the trustee takes the payment and it is paid in addition to your 60 monthly payments.

[HHM]

If you are not in a 100% payment plan, tax refunds simply up your percentage of payback. Sorry

For example, if you are making $200 per month payments over 60 months, ($12,000), and you have $48,000 in unsecured debt, you would be paying back 25% based solely on your disposable income that you commit to the plan. Now, if you end up having tax refunds during your chapter 13, lets assume you have a $1,000 refund for each of the 5 years, that will add a total of $5,000 to your chapter 13 plan. Thus, your percent payback INCREASES to 35.4%.

Basically, how you get around this is to lower your withholding on your W-4 to minimize your tax refund. There is a withholding calculator on the IRS website that will help you calculate your withholding. NOTE, you adjust your withholding AFTER your chapter 13 plan has been confirmed.

[michele71]

I asked my lawyer about tax refunds and looks like where I am we arent required to give the trustee any of it....they say either you get it throughout the year with exemptions or you can save it and get it and apply towards a little savings since it isnt being counted as income. We usually get about 3k back each year so thank goodness we will get to keep it.

[GeorgiaFarmer]

Thanks for the help!

[NEWBIE911]

Thanks for the help!

Does anyone know what state take what action with returns?

[Mi Bankruptcy]

Our 341 is not scheduled until Jan 09. I am CH7 no asset. So, I don't actually know if this will work.

We had plenty of room in our exemptions and were well below the median for the size of our family and income. I told our attorney that I wanted our 2008 tax return exempted( filing in 2009). He said he wasn't worried about it because of where I was on the median and my exemptions. I told him I wanted it listed anyway. He listed it on

Schedule B
Anticipated 2008 Tax return $6,000

On Schedule C He listed:

He put "Anticipated 2008 Tax Return"
(Husb)11 U.S.C. 522(d)(5) $3,000
(Wife)11 U.S.C 522(d)(5) $3,000