Chapter 13 and Income Taxes

[suzyqpug]

I got back 9,000.00 last yer in income taxes, but this year I will get back nothing cause my hubby uped hs exemptions so that he gets more money back in his paycheck. The only reason why we did this is because it would give us more money cause the CC payments were killing us. My question is will the trustee say something about that cause we got a tax return this year and are not getting one next year? Also, will he take my hubby bonus that he gets every year until the 13 is paid back? He go 48,000.00 gross last year. Also, if we are on a 5 year plan and then he takes the bonuses will he shorten our plan? I am afraid tha the trustee will see my hubby oay and the bonuses and say are they kidding me and make us pay back 100%. Believe it or not my hubby makes 116,000.00 plus 48,000.00 bonus per year and we had to live off the bonus every month until it was gone. Now we are short every month. Between my mortgage, truck payment, texes, ins, and utliities. If I only have 100.00left each month how will he base our payback?

[rrockinggramma]

unfortunately that bonus will figure into your plan. That is a nice bonus. Hopefully it will stay that way.

I don't know your bills and expenses but if you are in a 100 percent payback, then yes, that bonus will be paid towards your creditors and if 100 percent payback, yes it will shorten your plan.

[suzyqpug]

The bonus is nice BUT its not a guarantee it could stop at any point, although t hasn't in 13 years. BUT, my son just started high school and I have to put money away for college, will they allow me too to do? I am reading alot of the threads and it sounds like they leave you will absolutely no money to live on right?

[rrockinggramma]

without knowing exactly what your debts are and how much they are it is hard to really know how to answer your questions.

As I mentioned previously, a chapter 13 is a LIFESTYLE change. That means that you will not be living the way you do now. You will be budgeting. The purpose of the chapter 13 is to help you "reorganize" and get you back on track again. Savings for college will not be an allowed expense. You will have to figure out a way to cut back on some other budgeted items to come up with that savings amount.

[woeisme]

We have a reasonable amount to live on. Not a lot, but our trustee allowed us some breathing room, can maybe save $300 a month, although it seems every time we have a thousand or so saved up something comes up, like a big car repair, etc. It really depends on the trustee and other things in your situation as to how much wiggle room you get. If you have a lot of secured debt, and aren't willing to give up the items that are secured, like your house, there's nothing they can do about changing that part of your budget, so other things have to be scrimped on so that there's some money for payback of creditors.

The bonus will defintely be taken into account for the payback amount. You need to talk to an attorney to see how they do it in your area, if they can have a small monthly payment then a big chunk with the bonus, or what.

College savings for your child are not something they will allow in the plan. He is going to need to work his butt off in high school to get scholarship money, or take out a lot of student loans unless you find other areas in your budget that you can cut to save for it. However, you should be coming out of your 13 about the time he is ready to start college, and you will be out of debt at that point, so a positive thing. Perhaps think local school for 1st year or two (I'm a college professor, and believe me, that's the year they need the most structure and support from home anyway) to cut costs, then transfer to his "dream" school. I can really identify with you there, since my son is 13 and we will be ending our 13 about the time he's finishing high school too. But luckily one of the perks of my job is that my son can go here tuition free. Limits him to this one college unless he gets a lot of scholarship money to go elsewhere, but it's more of an opportunity than a lot of kids get.

[suzyqpug]

wow, that is a nice perk! if i get a job after we file and are on the plan, do i have to send more money? do they find out? is it like big brother is watching for the next 5 years?

[woeisme]

whether or not it ups your plan payments is really trustee dependent. Some trustees monitor your income by requiring copies of your tax returns every year, if they see on there that your income has increased, then they will want to modify your plan to take that extra income. Some trustees just say to tell them if your income increases by more than X-amount, with the X being trustee dependent (10% is the rule of thumb I've heard, but I'm sure that can vary too). So if you have a stickler for a trustee, then yes, every bit of extra income that you brought in from a part time job that wasn't included in the initial plan would be considered "disposable" and could go to the creditors, while other trustees might not care if you earned a little extra money, figuring it ups your chances of completing your plan successfully so they don't bother with it until it hits a certain threshold. Actually, my trustee doesn't ask for tax returns at all, so I guess he's the "non-stickler" type, just fly under the radar and make your payments on time and he leaves you alone for the duration of the plan. (Doesn't even take tax refunds unless they are over $6500, woo-hoo!) Said not to worry about it if I got standard raises in the 3-7% range per year, but if I got a windfall of some sort I'd have to report it through my attorney. But as Flamingo has said on here several times, the trustee controls all your finances throughout the duration of a CH 13, so it's really dependent upon how persnickety your district trustee is as to what will happen down the line.

[suzyqpug]

I see. I wish i knew of someone in my district so that they can tell me how the trustee is. thanks for all your answers

[woeisme]

Try posting a thread asking "Anyone here in the Eastern Arkansas District" using your actual district of course, see if you get any responses. I've both gotten responses and responded to people who are in the same district as I am (Southern Ohio) who have my same trustee, so you might luck into finding someone who is in your area if you ask. Good luck!