Can tax refunds be kept in a Chapter 13?

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Can tax refunds be kept in a Chapter 13?

Our Chapter 13 trustee does not permit debtors to keep any portion of their tax refunds received during the plan. I’m curious what other trustees in different disrtricts allow (i.e. are debtors forced to give up their refunds, and if so, what portion, if any, are they are allowed to keep).

Asked on March 12, 2011 under Bankruptcy Law, Michigan

Answers:

Mark J. Markus / Mark J. Markus, Law Offices of

Answered 10 years ago | Contributor

Most courts and trustees require tax refunds received during the course of a Chapter 13 repayment plan to be turned over to the Trustee if the plan proposes to pay less than 100% to unsecured creditors.  The reason for this is that the debtor is required to provide all disposable income into their plan and by definition there should not be tax refunds if the debtor is properly withholding on taxes (which would increase the monthly net income that should be being paid through the plan).

 

Mark J. Markus, Attorney at Law

Handling exclusively bankruptcy law cases in California since 1991.

http://www.bklaw.com/

Mark J. Markus / Mark J. Markus, Law Offices of

Answered 10 years ago | Contributor

Most courts and trustees require tax refunds received during the course of a Chapter 13 repayment plan to be turned over to the Trustee if the plan proposes to pay less than 100% to unsecured creditors.  The reason for this is that the debtor is required to provide all disposable income into their plan and by definition there should not be tax refunds if the debtor is properly withholding on taxes (which would increase the monthly net income that should be being paid through the plan).

 

Mark J. Markus, Attorney at Law

Handling exclusively bankruptcy law cases in California since 1991.

http://www.bklaw.com/


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