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Ah, tax season!

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  • Ah, tax season!

    I love tax season.

    We received a tax refund last year and our plan was confirmed a few days later. I didn't really get to research bankruptcy a whole lot before we filed, so I didn't think anything about receiving money. I received an e-mail from my attorney asking if I sent in my tax returns (not the refund, just a copy of the return) in July. I told her that I did not, but it wasn't a problem if I needed to. She told me not to worry about it, the trustee was just questioning if we filed.

    I think this board has me paranoid now though.

    We will receive a refund this year. I checked our confirmation order and I don't see anything about reporting income increases, taxes, or anything of that nature, is there a different order I'm supposed to be looking at? The only thing on the confirmation order that even relates to income is this:

    All future income and receipts of the Debtor shall remain the property of the estate and paid either to the Debtor or the
    Trustee as set out in the Plan or order and all other assets of the Debtor shall remain in the possession and control of the
    Debtor with the estate having a non-possessory beneficial interest in the assets in that they are necessary for the effective
    reorganization of the Debtor.


    I work in finance, I'm legal lingo stupid. True story. Am I looking at the wrong order or does my trustee really just not care?

    I'm trying to avoid contacting the paralegal at my attorney's office because she gave me her e-mail address (work and private) and she always answers within a few minutes and I'm pretty sure I drive her to the edge of insanity with my desire to know everything.about.everything.

  • #2
    You should contact your attorney, but read the following...

    All future income and receipts of the Debtor shall remain the property of the estate and paid either to the Debtor or the Trustee as set out in the Plan or order and all other assets of the Debtor shall remain in the possession and control of the Debtor with the estate having a non-possessory beneficial interest in the assets in that they are necessary for the effective reorganization of the Debtor
    The key is that all your future income and any other property received "shall" remain property of the estate. That means anything you get is subject to control by the Trustee. If you are in a less than 100% plan, then your Plan pledges all disposable income to the plan and renders it to the custody and control of the Trustee.

    Usually, there will be a specific paragraph in the Confirmation Order similar to this...
    All future refunds from the Internal Revenue Service shall be turned over to the Chapter 13 Trustee for distribution to the general unsecured creditors who have filed timely unsecured claims.
    Districts behave differently on this matter and you should contact your attorney to clarify.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      paple -

      As a fellow paranoid, I lingered over the tax return question for quite some time. I have found two schools of thought:

      1. Your District/Trustee wants every dime possible from you and if you get a tax return, they want that, too. This is District/Trustee specific and should have been noted in your Plan confirmation order. (NOTE: Even if your Plan confirmation order doesn't specifiy it, the Trustee can ask for any financial records at any time for any reason. Just sayin'...)

      2. Districts/Trustees noticed a long time ago that savvy Chap 13 abusers would inflate their withholding to make the take home pay look lower. Most Trustees (mine included) review each Plan as it is submitted and calculate the DMI vs. tax bill individually and determine wheter the withholding amount noted in Schedule J is accurate. With that being said, the plan payment is determined using what is identified as the "actual" monthy withholding amount. No sneaking any unnecessary withholding through the system! QED - any tax return is yours to keep as your Plan payment is made based on actual numbers.

      I hope that makes sense - when I re-read it it appears a little convoluted. Mes apologies...

      Cheers!

      --13for60
      Last edited by 13for60; 01-06-2011, 12:47 PM. Reason: Blasted typos!
      Filed Chapter 13 - 10/05/10
      341 Scheduled - 11/10/10

      Comment


      • #4
        justbroke- Nada. Our confirmation order is very short and mentions nothing about taxes, IRS, or any of that. It pretty much just says our case is valid, it doesn't appear as though we're attempting illegal activity, we agree to make monthly payments, and we'll get approval before taking on any new purchases. It almost so short I think they forgot a page or three.

        13for60, I'm kind of catching the same thing from reading posts. It seems like some of these trustees are complete hardasses, I suppose with good reason somewhat, given the cicumstances of some cases.

        Just for the record though, I did hassle my poor lawyer today. I'm on a 100% payback, so it's a moot point. Apparently thinking about this is just one big waste of time because the trustee isn't going to collect more than I owe. I always like to think of the worst possible scenario just in case. lol

        Comment


        • #5
          One thing I learned about going through a Chapter 13 that your money is not your own. In order to complete your Plan successfully and avoid problems or a dismissal, when you receive a tax refund, a raise, a bonus, hit the lottery, receive an inheritance, etc., etc., anything that changes your status from what it was on the day you filed, call your attorney and ask. Many times you don't have to report it if it falls within a certain percentage but protect yourself, call your attorney (they give you their number and email for a reason) and ask. Also ask your attorney if you need to provide your tax returns to the trustee. Don't assume anything. Most people have to provide them within a certain period of time after filing.
          _________________________________________
          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


          • #6
            I've been wondering about this too, since I know I will be receiving a refund. I get one every year. My confirmation order says nothing about future refunds from the IRS, or even anything about future income and receipts. I've read it forwards and backwards several times to make sure I didn't miss anything buried in legal mumbo jumbo. The only thing I can find is some language about increasing my payment if the TT has insufficient funds to pay the claims as set forth in the order. I'm not sure how that would even happen if I continue to make my payments every month. My attorney is no help, all he's ever told me is that I "probably" will have to surrender my tax refunds. But he also told me my student loans would "probably not" be paid in the plan and they are. So my guess is that if my TT wants a copy of my return and/or my refund, he will send me or my attorney something requesting it. They have copies of my last 2 years' tax returns, so they know I always get refunds. I'm a bit surprised it's not spelled out in my confirmation order, or anywhere for that matter.
            Filed Ch 13 - 2/2010
            341 meeting - 4/2010
            Confirmed! - 6/2010

            Comment


            • #7
              We get to keep our refund if it is less then $2000. If it is $2000 or more then the trustess gets it. So to avoid getting a $2000 return we claim a LOT or exemptions on our monthly paycheck.

              Comment


              • #8
                Originally posted by Lissy View Post
                I've been wondering about this too, since I know I will be receiving a refund. I get one every year. My confirmation order says nothing about future refunds from the IRS, or even anything about future income and receipts. I've read it forwards and backwards several times to make sure I didn't miss anything buried in legal mumbo jumbo. The only thing I can find is some language about increasing my payment if the TT has insufficient funds to pay the claims as set forth in the order. I'm not sure how that would even happen if I continue to make my payments every month. My attorney is no help, all he's ever told me is that I "probably" will have to surrender my tax refunds. But he also told me my student loans would "probably not" be paid in the plan and they are. So my guess is that if my TT wants a copy of my return and/or my refund, he will send me or my attorney something requesting it. They have copies of my last 2 years' tax returns, so they know I always get refunds. I'm a bit surprised it's not spelled out in my confirmation order, or anywhere for that matter.
                Guessing can get you into trouble in a Chapter 13. It's not worth it - if you can't get an answer from your attorney via phone or email to give you some backup on this, show up at his office physically and request a response.
                _________________________________________
                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

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