sent trustee tax refunds will this lessen number of plan pmnts

[lookin4info]

I had a question about tax refunds but didn't see this when I searched. When we send in our refunds, does this lessen the number of plan payments or allow us to complete the plan sooner by overpaying? Or, does it just become extra and is divided among the unsecured debts?

Our refunds so far have amounted to about 7 monthly plan pmnts. Just wondered if that will get us paid up sooner. I know it still has to go at least
36 months. Our 36 months is up this January, and another refund will be sent in.

Thanks for your help!

[kjrmom911]

If you aren't in a 100 percent plan my understanding is that it will be divided among the unsecured creditors. It is too late now, but it would be wise to adjust your deductions so that you don't get a large return each year.

[justbroke]

As stated, it typically does not shorten the plan duration. This amount is typically considered to be "extra" DMI (disposable monthly income) and is simply added to the Plan Base. In many cases, the Trustee will adjust the "plan base" at some point in the Chapter 13 to take into consideration the "extra" DMI.

[spidge]

A challenge that came up in our taxes is that we had tons of deferred interest on the house that created a huge write off for taxes. This year will be the last of the deferred interest and my write off will drop considerably. Just thought I would share that factoid. Plan your withholdings carefully.

My trustee adjusts the plan base when he adds the tax refund into the matrix. It is disappointing, but it has no effect on my payments yet and we are in a 3 percent payback.

[LadyInTheRed]

It is too late now, but it would be wise to adjust your deductions so that you don't get a large return each year.

Don't do that without talking to your attorney. If you lower your withholding, the difference may need to go to your monthly payment. The refunds are being treated as DMI. You probably can't get out of paying that DMI to your plan simply by shifting it from an annual refund check to your pay check,

[magic13]

I had a question about tax refunds but didn't see this when I searched. When we send in our refunds, does this lessen the number of plan payments or allow us to complete the plan sooner by overpaying? Or, does it just become extra and is divided among the unsecured debts?

Our refunds so far have amounted to about 7 monthly plan pmnts. Just wondered if that will get us paid up sooner. I know it still has to go at least
36 months. Our 36 months is up this January, and another refund will be sent in.

Thanks for your help!

When you say that another refund will be sent in, are you talking about 2012 taxes or 2013 taxes. If you are talking about 2013, why not file them in April 2014 maybe your case will be closed by then considering your last payment is in January of 2014

[spidge]

When you say that another refund will be sent in, are you talking about 2012 taxes or 2013 taxes. If you are talking about 2013, why not file them in April 2014 maybe your case will be closed by then considering your last payment is in January of 2014

This sounds good, but I am willing to bet the trustee waits out that refund as it will represent a full year within the BK.

I would just pull the bandaid as soon as you can. File early so the trustee gets all the paperwork he/she needs to complete your case. If it does not apply it will come back as a refund.

[katztoo]

Don't do that without talking to your attorney. If you lower your withholding, the difference may need to go to your monthly payment. The refunds are being treated as DMI. You probably can't get out of paying that DMI to your plan simply by shifting it from an annual refund check to your pay check,

We did this and the trustee asked for paystubs when our refund was smaller. She campared them yo our original deductions, saw what we did and raised our monthy payment.

[159515951]

My understanding is that you can only shorten the plan duration with exempt funds. If you exempted a certain amount of $$ in savings and paid that into the plan (making sure you communicated same with the Trustee), I believe those exempt funds will shorten the time period of your plan.

[lookin4info]

I think I'm going to be disappointed then about our tax refunds. Rats! Oh well! the next tax refund they will receive will be for the 2013 tax year. We are at a 1% payback. I guess I can't complain if they send it to the unsecureds, but I was hoping that it would shorten our payments. Our refunds are so high because we over deducted so that we wouldn't owe. They required us to do that so that we would not owe taxes again since a lot of our plan was for back taxes. After the first year, and not owing for the first time in many years, I did reduce our withholdings some. I think I will put them back the way they were when we first started. I don't want to have any problems, especially if they are going to get it anyway in refunds or raised payments! Thanks for your help everyone!

[LadyInTheRed]

My understanding is that you can only shorten the plan duration with exempt funds. If you exempted a certain amount of $$ in savings and paid that into the plan (making sure you communicated same with the Trustee), I believe those exempt funds will shorten the time period of your plan.

Interesting. I haven't heard that before, but it makes sense. If it's true, in 2 months, I could use my exempt CD to pay off my plan. Very tempting. But, I won't do it. Makes more sense to go the full 22 months on what is basically an interest-free loan. Besides, I like the security of having that $10K there if I need it.

[justbroke]

My understanding is that you can only shorten the plan duration with exempt funds. If you exempted a certain amount of $$ in savings and paid that into the plan (making sure you communicated same with the Trustee), I believe those exempt funds will shorten the time period of your plan.

I have never heard of this, especially for people in a 60 month plan (due to the debtor being over-the-median income). I have heard that you could pay off your Chapter 13, post BAPCPA of 2005, if you paid 100% of the allowed secured claims in this situation, using exempt funds. Typically, those that payoff the Chapter 13 do so using a cash-out refinance of their home or using exempt funds (typically from a retirement plan).

If that was the case, that you could pay off from simply exempt funds, I would see many more Chapter 13s doing so, and I do not. I had enough in my 401(k) to pay the base which was only $4,000, very easily. However, that was and is not an option as being over-the-median in a 60-month mandatory plan paying less than 100%, does not allow an early payoff. It is quite clear in the plans confirmed after 10/15/2005 that the applicable commitment period is 60 months or 100% in over-the-median cases.

[159515951]

I recently modified my filing to add exempt funds, and was clearly told by my attorney that I could choose to pay the funds into the plan in order to shorten the duration of the 13. He's a great attorney, and was very clear on this point. YMMV -- maybe it's not allowed in all districts.

And I am not in a 100% payback plan.

[justbroke]

It depends on several factors. One of the primary factors is whether you are over or under the median income. If you are over the median, it really depends on the Trustee and other factors. If you are under-the-median, you can typically payoff early after a certain period of time in plan.

[ohheckno]

Did you guys have to send your state refund to the trustee or only your federal? Our atty told us we had to send anything above $800 of our federal and didn't mention the state.