Under normal circumstances, Chapter 13 trustees usually hold onto any refunds they are given as part of Chapter 13 bankruptcy cases; however, there may be circumstances under which you could retain some or all of it for yourself. Your repayments to creditors and plan will ultimately decide whether you can keep your Tax Refund in Chapter 13 when filing for bankruptcy. In instances of an unexpected hardship, however, the bankruptcy court can modify your plan to alleviate payment for this refund. 

Tax Refund in Chapter 13

Assume you qualify to file Chapter 13 bankruptcy. Here is some important advice about how to approach it and prepare!

 

In a Hurry? Dial +18-503-850-342 Now!

Can My Tax Refund Be Lost in Chapter 13?

Your circumstances will dictate whether you must surrender your refund; Chapter 13 creditors have an equal claim on all “disposable income”, so each year when receiving an income tax refund it should be turned over to the trustee to pay your creditors.

Keep Your Income Tax Refund Under certain conditions, it may be possible for you to retain a refund of income tax: by complying with these criteria. As part of a budgeting strategy or excusing yourself from tax refund claims. With a 100% Plan, all your unsecured debts are addressed immediately and in one lump sum payment plan. For best results, consult your Chapter 13 bankruptcy lawyer before creating this strategy.

How to Receive a Tax Rebate in Chapter 13 Bankruptcy?

If you owe taxes, filing for Chapter 13 bankruptcy relief could allow for some tax refund in Chapter 13. Annually, submit a plan modification that includes: the total refund amount as an itemized list with an explanation.

As long as there’s some other form of hardship present, bankruptcy courts usually excuse tax refund payments owed for unexpected and necessary expenses such as food or car payments that were included on Schedule: Your expenses however, requests made solely to pay these items are unlikely to be approved without some other consideration being considered first.

If any of the following expenses arise (repairs to a car or new vehicle; major appliance replacement; funeral expenses etc..), the court may grant relief.

Unexpected Medical or Dental Expenses

Be sure to keep receipts as proof if the court allows you to keep any refund. If Chapter 13 plan payments prove difficult for you, explore alternatives. With regards to tax refunds, those on 100% or near 100 Chapter 13 plans could potentially keep their refund.

Check whether your plan covers paying creditors if it does not state otherwise, especially if all debts have already been cleared off or are close to being so. In such a situation, giving over your tax refund might no longer be required of you.

How Can I Calculate My Chapter 13 Plan Proportion? 

If calculating a Chapter 13 plan percentage is challenging for you, subtract your mortgage payment, car payment, and any other debts secured with collateral from your plan payment and use any remaining amount towards paying unsecured creditors such as medical bills, credit card balances, or late lease payments owed.

In a Hurry? Dial +18-503-850-342 Now!

Who Pays 70%-100% of Chapter 13 Plan Payments?

One advantage of Chapter 13 plans is their comparatively modest debt payments; most typically only contributing up to 30-40% towards unsecured debt payments. If one or both of the following categories apply to you, chances are higher you will likely owe an increased proportion.

If both filers earn high incomes while possessing low debt loads, both filers can claim identical monthly expenses. After paying these costs, Filer A will have $75,000 left over towards unsecured debt payments while Filer B may only need to make 75% of payments towards that debt load.

When owning valuable property, bankruptcy exemptions cannot provide adequate protection. Let’s say for example your credit card company sues for $45,000 and threatens to seize the $450k vacation condo you own outright as collateral; your only choice then would be paying either $450,000 in total debt (payable over five years at 100% plan rate or using bankruptcy exclusions as protection), or paying only that sum at once to secure its retention and keep the condo.

How Will You Know If You Have a 100% Plan?

Once again, this can only be determined through in-depth conversations between yourself and your lawyer on this subject matter which have left a profound financial mark in your favor. Due to our state’s homestead exclusion of only $50,000, your home’s $200,000 equity may not be protected and could potentially be sold off to pay creditors regardless of which chapter of the bankruptcy filing.

Chapter 7 bankruptcy will enable a trustee to sell off your home and use proceeds of sale to repay your creditors; if this is your plan for keeping it, Chapter 7 might not be the best option – filing Chapter 13 might provide more security against potential home seizures by creditors and would provide greater chances for keeping possession. Often it would be more appropriate and effective to file Chapter 13.

Chapter 13 Tax Requirements 

A Chapter 13 debtor is required to file tax returns for four years before bankruptcy filing as well as each year during their plan, along with receiving copies or transcripts as evidence that filing has taken place. A court-appointed Chapter 13 Trustee will assess this filing status when you initially file, so make sure copies or transcripts of those returns or transcripts are ready when filing bankruptcy.

As trustee requirements can differ depending on their jurisdiction, your bankruptcy lawyer will inform you if and when they require copies of your tax returns from you.

Summing Up!

Balancing Chapter 13 bankruptcy is already overwhelming without having to consider your Tax Refund in Chapter 13. With the right strategy, you may be able to retain your refund for essential expenses. An experienced bankruptcy attorney can guide you in understanding your options and making the best financial decisions.

Do not let your Tax Refund in Chapter 13 be left to chance—contact a Chapter 13 bankruptcy lawyer today at Bruner Wright PA and explore the various options that will protect your financial future.

Are you thinking about dismissing your Chapter 13 Bankruptcy? 

Before making this critical decision, you must explore its consequences and explore options available to you. We are here to provide support should payment difficulties or debt be an issue; don’t hesitate to get in touch! We can assist.

Contact Bruner Wright PA right now for personalized and expert assistance on navigating the complexities of Chapter 13 bankruptcy.

Let us guide your decisions so you make informed choices to find a path toward financial freedom – don’t put off starting down this path; start now!

In a Hurry? Dial +18-503-850-342 Now!