Injured spouse! Please help

[Jtan350]

I am in a chapter 13. My husband is not. Last year we did a injured spouse. It took forever to get our refund and they took around $500 of our $5500 refund because I had $1500 only in income. This year I have been a stay at home parent and have 0 income. Since I have no income do we have to do the injured spouse form again? My attorney feels we can argue I had no income and that the refund is my husbands since he is the only one who worked. On the flip side, I don't want to lose our 10,000 refund with claiming 2 kids. Help! Can the chapter 13 take our joint refund if I had no income? Do you think we have a leg to stand on if we fight it and take it to the courts saying I had O income so technically I didn't contribute to any of the refund.....

[justbroke]

The only one that can answer this is your attorney, the Trustee and/or the IRS. Personally, I don't know why you needed to do the injured spouse form since the IRS, in an active Chapter 13, can't recoup (setoff) anything that is being paid in a Chapter 13. This is why I don't think anyone can answer the question easily because there are some very fact specific things that required you to do that form.

As for whether your future refund is in jeopardy and whether it is subject to be given to the Trustee is another fact specific issue. I have read a few cases just like this because I faced a similar issue. The cases I read are too varied, but in my Appeals Circuit (11th) the issue is well settled that the refund is allocated to the spouse that earned the money. I think in your case, you may have some Earned Income Credit (EIC) in there as well.

Just too complex.

[Jtan350]

That's what I think but even if I have no income, if I get a EIC for the kids could they take part of the refund? No one can give me a straight answer ughh.

[justbroke]

There is no straight answer because you are in a Chapter 13 bankruptcy, it's probably less than a 100% plan, and the plan indicates that you'll contribute turn over all disposable monthly income (DMI) to the custody and control of the Standing Chapter 13 Trustee for distribution to the unsecured creditors. In neither a tax attorney nor a bankruptcy attorney.

There are Trustees that like to argue that any refund is subject to their control pursuant to the Chapter 13 Plan as confirmed. Maybe your attorney can look at In re Ina Belle Brown, 186 B.R. 224 (Bankr. W.D. Ky. 1995) which is about whether EIC is "assignable" in a Chapter 13 in Kentucky. Note, however, that Mrs. Brown was part of a bifurcated Chapter 13, and this was really about the Chapter 7 exemption of the EIC.

You may not know until you actually claim the EIC and then submit a copy of your return to the Trustee next year. Your attorney may also pre-empt this, after filing, by filing a Motion to Modify Plan in order to keep that 2016 Tax Refund. There are just too many variables.