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Lawyer proposed we keep IRS refund, trustee wants all-can we fight it?

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  • Lawyer proposed we keep IRS refund, trustee wants all-can we fight it?

    Our plan was filed on March 1, 2010. In order to make the numbers work for our budget our lawyer proposed that we be allowed to keep up to $4000 of our income tax refund. We got a letter today that the plan was confirmed, but we must surrender 100% of our refund. Can we fight this? Our budget doesn't even add up without the income tax figured in....also, if we can't get the refund, will we be able to complete our 36 month plan early? The trustee's website has us listed at 10% payback maximum which is $8100. If the trustee takes our refund and we continue payments we will have paid $8100 in 18 months.
    Any info would be appreciated. We are in the Western Michigan district.
    Filed Chapter 13 - 3/1/2010 341 Meeting - 3/30/2010 Confirmation Meeting - 4/28/2010
    Confirmed - 5/14/2010 Closed - 8/16/2013
    Discharged - 9/18/2013

  • #2
    The trustee can do anything he/she wants as he is in control of your finances from the day you file until the day you are discharged. He/she apparently was not happy with and found something out of sorts with what you and your attorney proposed. Your attorney should have a full explanation from the trustee as to what was wrong so ask your attorney. The tax refund will be paid to your creditors over and above your confirmed amount; and it will not result in your plan being paid off early.
    _________________________________________
    Filed 5 Year Chapter 13: April 2002
    Early Buy-Out: April 2006
    Discharge: August 2006

    "A credit card is a snake in your pocket"

    Comment


    • #3
      Originally posted by eliminator97 View Post
      Our plan was filed on March 1, 2010. In order to make the numbers work for our budget our lawyer proposed that we be allowed to keep up to $4000 of our income tax refund. We got a letter today that the plan was confirmed, but we must surrender 100% of our refund. Can we fight this? Our budget doesn't even add up without the income tax figured in....also, if we can't get the refund, will we be able to complete our 36 month plan early? The trustee's website has us listed at 10% payback maximum which is $8100. If the trustee takes our refund and we continue payments we will have paid $8100 in 18 months.
      Any info would be appreciated. We are in the Western Michigan district.
      A confirmed plan is generally binding on all creditors and other interested parties who received notice of the plan. . . including the trustee. You can propose most anything in a chapter 13 plan and if someone doesn't like it, their remedy is to object to the confirmation of the plan. But once the plan is confirmed without objection or over an objection, it becomes the law of the case.

      I disagree with Flamingo's assertion that the "trustee can do anything he wants". A lot of people believe that because the trustee is an "official" in the bankruptcy case and he understandably appears to have some "authority". In fact, the trustee is nothing more than the attorney for the unsecured creditors. The trustee can object to anything he wants, but if he fails to object and the plan is confirmed, he is bound by the terms of the plan.

      The letter you received may just be a form letter from the trustee with "canned" language about what ususally happens to your refund. Call your lawyer.

      On a side note, why are you having so much withheld? If you reduce your withholdings by amending your w-4, you might eliminate this issue.
      Last edited by MSbklawyer; 05-23-2010, 01:20 AM.
      Pay no attention to anything I post. I graduated last in my class from a fly-by-night law school that no longer exists; I never studied or went to class; and I only post on internet forums when I'm too drunk to crawl away from the computer.

      Comment


      • #4
        Originally posted by MSbklawyer View Post
        snipped..

        On a side note, why are you having so much withheld? If you reduce your withholdings by amending your w-4, you might eliminate this issue.
        In Michigan the trustees add language to the confirmation orders like this phrase: "Do not do anything to alter income tax withholdings during the life of the plan".

        The OP & attorney should have addressed that prior to filing.
        Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
        I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

        Comment


        • #5
          I think that it may have been a form letter, we were informed about three weeks ago that we have a different trustee than the one we started with. The trustee's website still lists our plan as unconfirmed. Here's hoping our lawyer has some clear answers on Monday. Thank you for all the quick replies.
          Filed Chapter 13 - 3/1/2010 341 Meeting - 3/30/2010 Confirmation Meeting - 4/28/2010
          Confirmed - 5/14/2010 Closed - 8/16/2013
          Discharged - 9/18/2013

          Comment


          • #6
            I wonder if confirmation is contingent on surrendering the refund?

            The OP intimated the confirmation letter contained the demand to surrender the refund.

            Comment


            • #7
              Originally posted by secondtimer View Post
              I wonder if confirmation is contingent on surrendering the refund?

              The OP intimated the confirmation letter contained the demand to surrender the refund.
              Sure sounds like the typical confirmation letter clause about tax refunds that we see in Michigan. However the OPs attorney can try and fight it for the OP considering that the makeup of this refund is part of their monthly income that was budgeted.
              Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
              I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

              Comment


              • #8
                Originally posted by MSbklawyer View Post
                (snip...) I disagree with Flamingo's assertion that the "trustee can do anything he wants". A lot of people believe that because the trustee is an "official" in the bankruptcy case and he understandably appears to have some "authority". In fact, the trustee is nothing more than the attorney for the unsecured creditors. The trustee can object to anything he wants, but if he fails to object and the plan is confirmed, he is bound by the terms of the plan.

                The letter you received may just be a form letter from the trustee with "canned" language about what ususally happens to your refund. Call your lawyer.

                On a side note, why are you having so much withheld? If you reduce your withholdings by amending your w-4, you might eliminate this issue.
                It was late when I responded to this (too much outside garden work!) and I left out clarifying verbiage that the trustee can and will request additional information, etc. if he/she feels something is up/not right as to anything financial and that their attorney should be able to explain to them what the trustee is looking for and why there is a problem. We all want to hold onto tax refunds but when/if they are taken during a 13, they are disbursed over and above the confirmed plan amount to the creditors as the OP thought it would pay off their plan early.
                _________________________________________
                Filed 5 Year Chapter 13: April 2002
                Early Buy-Out: April 2006
                Discharge: August 2006

                "A credit card is a snake in your pocket"

                Comment


                • #9
                  Just talked to our lawyer. The trustee did send out a standard form letter and our plan WAS confirmed as written, so we are allowed to keep $4000 of our return. Our return is large due to family size - and we like getting it in a lump sum.
                  Filed Chapter 13 - 3/1/2010 341 Meeting - 3/30/2010 Confirmation Meeting - 4/28/2010
                  Confirmed - 5/14/2010 Closed - 8/16/2013
                  Discharged - 9/18/2013

                  Comment

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