If you are anticipating a tax refund and plan to file for Chapter 13 bankruptcy, or are in the middle of a Chapter 13 bankruptcy, here's what you need to know.
The Chapter 13 trustee can take your tax refund. However, if you have calculated your disposable income correctly, your plan may already taken into account any potential tax refunds.
Here are several ways that trustees deal with tax refunds:
Your Chapter 13 plan states that you will turn over tax refunds. In many districts, the court's plan confirmation order governs what gets paid into your Chapter 13 plan. The order, or even your plan, might provide for the tax refund to be turned over to the Chapter 13 trustee to be used in your plan.
Trustee reviews plan every year. In some districts, the Chapter 13 trustee reviews your tax return each year to adjust your plan payment and may require you to turn over any tax refunds you receive.
You keep unexpected tax refunds. In other districts, as long as you are current on your plan payments, an unexpected refund will be yours to keep.
Many Chapter 13 trustees post their policies regarding tax refunds on their websites.You should be able to find the Chapter 13 Trustees in your area by contacting the clerk of the bankruptcy court or using the private trustee locator on the United States Trustee’s website.
To learn more about the role of the Chapter 13 trustee in your bankruptcy case, see the articles and Q&As in our Bankruptcy Trustee area.