tax returns

[bailey2226]

Can they take any money that you could be getting back in a tax return towards your debts in a chapter 13?

[Flamingo]

Yes.

[BKParalegal]

Depends on your state exemptions, some have an exemption for tax refunds, other don't. It also can affect your total income, so your payments may be adjusted as well.

Good luck

[Flamingo]

Depends on your state exemptions, some have an exemption for tax refunds, other don't. It also can affect your total income, so your payments may be adjusted as well.

Good luck

Also, it can be applied over and above your confirmed Plan amount as additional disposable income and disbursed accordingly to creditors in the year received during your Plan, not affecting your plan payment. Tax refunds, inheritances, lottery winnings, bonuses, raises, etc. are considered extra disposable income if received during a Plan period and can be taken and applied by the Trustee to your creditors over and above your Plan payment/amount.

[laurannm]

Can they take any money that you could be getting back in a tax return towards your debts in a chapter 13?

Y
es, they CAN take your tax refunds. Whether or not they actually will varies from trustee to trustee. Some take all of it, some only take the refund if it is above a certain amount, others don't touch any of it

[BKParalegal]

Some people are confusing what happens in a Chapter 7 and a Chapter 13. To clarify, and I could be more specific, if I knew what state you are filing in. If there are no exemptions for tax refunds or a wild card exemption that you can throw it in, in a Chapter 7, the trustee can take the refund as a non-exempt asset. The reason they might not if it is a low amount. Chapter 7 trustee's get to keep 25% of the net proceeds they haul in and then they divvy out the rest to your creditors. In a Chapter 13, the trustee can request that your tax refunds during the plan get turned over to them. And here is the great balancer, alter your deductions with your employer so you don't get refund anymore, and make sure your expenses in your current plan will eat up the additional funds not taken out of your paycheck(You do this before you file, it is called pre-bankruptcy planning)

[bailey2226]

We would be filing in NJ

[BKParalegal]

NJ uses Federal Exemptions. Depending on if you own a house and how much equity you have (needs to be less than $40k) then you can use your wild card exemption to protect your tax refund. NJ is a pretty easy state to protect your stuff.

Good Luck

[Lajazz947]

What about California in this example?

I read some of the items online but it gets confusing.

We own a home worth an estimated $800,000
owe

$715, 000 on first
$50,000 on second
$75,000 exemption allowed in Ca
$43,000 mechanics lien (in litigation now)

I don't think that even if I had the house valued at $850,000/$875,000 that the Trustee after comissions to sell the house would find it worthwhile.

But back to the question, In Ca is my tax return safe under these conditions?

[Flamingo]

Some people are confusing what happens in a Chapter 7 and a Chapter 13. To clarify, and I could be more specific, if I knew what state you are filing in. If there are no exemptions for tax refunds or a wild card exemption that you can throw it in, in a Chapter 7, the trustee can take the refund as a non-exempt asset. The reason they might not if it is a low amount. Chapter 7 trustee's get to keep 25% of the net proceeds they haul in and then they divvy out the rest to your creditors. In a Chapter 13, the trustee can request that your tax refunds during the plan get turned over to them. And here is the great balancer, alter your deductions with your employer so you don't get refund anymore, and make sure your expenses in your current plan will eat up the additional funds not taken out of your paycheck(You do this before you file, it is called pre-bankruptcy planning)

BKParalegal - in the OP's original posting, he asked about the situation in a Chapter 13....since there is no reason to take this beyond what it actually is, the simple answer is "yes" to the OP. We don't know anything further about his situation.

[Tromploi]

I am also in CA, and we are in the process of doing our 2007 taxes. I have my packet and fee ready to turn in to the atty, BUT as I was doing stuff last night I realized it will be MUCH better to do our taxes first. Our income looks HUGE on paper (180K) but once we figure in all the deductions for expenses, write offs (we're both self emplyed) it dwindles WAY down. So we are going to have them done, then turn the return in with our packet. Also, IF we are getting a refund we will just have the IRS keep it (roll it over). Would rather have them paid "ahead" then have it figured in as additional income.

[Flamingo]

I am also in CA, and we are in the process of doing our 2007 taxes. I have my packet and fee ready to turn in to the atty, BUT as I was doing stuff last night I realized it will be MUCH better to do our taxes first. Our income looks HUGE on paper (180K) but once we figure in all the deductions for expenses, write offs (we're both self emplyed) it dwindles WAY down. So we are going to have them done, then turn the return in with our packet. Also, IF we are getting a refund we will just have the IRS keep it (roll it over). Would rather have them paid "ahead" then have it figured in as additional income.

You may need trustee permission to allow you keep a refund and/or "roll it over." Again, Chapter 13's all differ - it is always best not to guess at what you can or cannot do and all plans are different - when you file, specifically ask your attorney as to how tax refunds, etc. will be handled in your plan. Many are required to turn in tax returns each year to their Trustee - we had to provide ours within 5 days of filing - both state and federal.

[Tromploi]

Okay good to know. Will ask the atty for sure. I thought if we did our taxes now and didn't file for 6 months or so it wouldn't make a difference, but then I shouldn't assume. Thanks for that.

[itneverends]

Also, IF we are getting a refund we will just have the IRS keep it (roll it over). Would rather have them paid "ahead" then have it figured in as additional income.

You need to be careful, depending on your trustee, you could be on the hook for paying back the refund amount even if the IRS keeps it. My trustee states you need to submit the refund amount even if the IRS keeps your refund for back taxes. So you could be putting yourself in a situation were the IRS keeps the money and you have to pay it anyway.