Trustee requested tax refund

[gasman123]

We filed bankruptcy in October before the new laws went into effect. Had our 341 meeting in November. Everything went swoothly and were were discharged Jan 31 as a no asset chapter 7. The trustee during the 341 meeting did tell us that we had to file our income taxes and if we got a refund we were suppose to sent the check to him directly or through out attoney without endorsing it along with a copy of our return.

During 2005, I became disabled and unable to work which is why we had to file bankruptcy. Luckily, I have LTD (Long Term Disability) insurance which give me an income that is non-taxable. During the first 8 months of 2005 I had taxable income from working, sick leave, and short term disability. When I finally was awarded LTD benefits, we lost our employer provided health care and were allowed to continue recieving medical coverage so long as we paid the premium under COBRA. The only way we could afford to do this was tap into my retirement account (401K) which resulted in more taxable income for 2005. As it is, we are getting back a sizeable refund which could go along way towards paying of some medical bills incurred since BK.

Is the bankruptcy trustee going to take our entire refund away from us? Is so, Why? We could sure use the money since we are on a fixed income now. Is there anything that can be done or said that will persuade the trustee to not take our entire refund away from us

[StaciMM]

If nothing was said & you were ruled 'no asset', it is unlikely that the trustee is interested in your refund. Worst case scenario, though, is the trustee could ask for 79% of your refund. (If you filed mid October you filed when about 79% of the year had passed.)

[kcj]

Could you file two tax returns? I think you can opt to do a short-year return that would be everything as of the date of your BK filing, then another return for the remainder of the year.

[Minnymouth]

Stacci,
Did you notice they said the Trustee said to send him the check uncashed with a copy of their forms they filed.
So evidently this Trustee intends to get some of that tax refund.....

You asked "why" - well because it is an asset to you that he can pay out to your creditors or himself.....

Hate to see you loose any of it......but sometimes that is the way it is.....

So suck up and grin and bear it, you've made it this far!!!

[StaciMM]

Sorry! I misread, thought the trustee "Didn't" tell them anything at the 341...

[bilbo]

Yep he'll take his cut of the refund--and then probably hire himself as his own counsel so he can bill hourly to get more of the refund. That's what my trustee has done. There won't be anything left of my refund for the creditors lol

[lilgoose]

Our trustee wanted copies of our returns. Sent those in and had to wait to hear what amount he was going to take. Our atty did the figuring for us. "The number was calculated by the fact that we had a federal refund of $XXXX and a state refund of $XXXX for a total of $XXXX. Since the petition was filed on August 29, 2005, the 240th day of the year, I prorate the refund over the year (XXXX times 241 divided by 365)" and that is how he figured out what we got to keep of our refund. It basically boiled down to us getting a wee bit over half.

It stinks as we could have, like all of us here, used the entire refund amount also. But, just remember that it is only ONE TIME and it is a small price to pay for what you are working on leaving behind!

Chin up and keep telling yourself that there are better days ahead!