You are here:

Bankruptcy Law/Chapter 13 - Tax refund

Advertisement

Expert: - 6/11/2007


Question
Hi, my husband and I are going to be filing bankruptcy this week, I'm all stressed out, the attorney told us first that we will have to give the Trustee our whole tax refund next year and maybe the next years until bk ends.
Is this true? How does it work? why she sais MAY BE for next years?. Also my other question is: am i gonna be providing the trustee with paystubs and proof of income the next few years? until when? when the relationship ends?. Thank you.

Answer
I think your attorney is in the best position to answer your questions, and you should not feel shy about asking for some answers. That is part of what you pay for.

That said, most 13 trustees are going to take tax refunds because the refund amounts usually represent money that you did not presently need for necessary living expenses.

One way that I try to get around it is by having clients adjust their tax withholding so that there is very little excess to be refunded - assuming that you have enough legitimate necessary living expenses to absorb the extra money into your budget.

Many people like having excess withholding because they count on the refund to pay for certain fixed annual expenses like property taxes or car insurance. If you can establish that you have such necessary annual expenses, that the expenses are not already covered in your monthly budget and will need the entire refunds, you would probably convince the trustee that you should be allowed to keep it.

You are required to file a new schedule of current income, proof of income, and current living expenses every year while you are in Chapter 13. The purpose is to make sure that people are paying their best effort and not taking longer than necessary.

Bankruptcy Law

All Answers

Answers by Expert:

Ask Experts

Volunteer

Los Angeles Bankruptcy Lawyer Leon D. Bayer

Expertise

Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.


Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.

©2012 About.com, a part of The New York Times Company. All rights reserved.