Tax refund and IRS debt

[Tinker]

Hello,

I'm looking to verify that my understanding of something is correct. Here are the relevant facts/info:

I am in chapter 13.
It is written into my plan that I can keep federal tax refunds up to $2000.
However, I also have IRS tax debt (about $4000) that has been included as a priority debt in my ch. 13 plan.
This year, I'm due a refund of $2400.

My understanding is that even though the past due tax is rolled into my BK,the IRS will just keep the refund to offset what I owe, and then that debt will be paid more quickly leaving more plan money to paid to other debts.

Is this accurate?

Thanks!

[krielly]

This was not our experience. We had included both State and Federal Debt in our 13. We still received our refunds. I think I may have had to call the state and have them release a hold on our refund, but it wasn't a big deal. It's been a few years, so I don't remember specifically, but I DO know we got all of our refund, and none of it was applied to either state or federal debt included in the plan.

[AngelinaCat]

Krielly's experience is not what happened to us. We were an Asset Chapter 7, which essentially meant that we were a short term Chapter 13. Much of our debt was IRS, which could not be discharged. We don't have state income tax in Florida--yet! We had not had a tax refund for years, but were in line for a 'Stimulus check' in 2008. We didn't get it; instead we got a notice telling us that our 'Stimulus' was applied to our tax debt. We sure could have used that check!

Good wishes to you. Maybe your situation will be different. Please keep us posted.

[justbroke]

My understanding is that even though the past due tax is rolled into my BK,the IRS will just keep the refund to offset what I owe, and then that debt will be paid more quickly leaving more plan money to paid to other debts.

In a Chapter 13, where the IRS is included as a priority creditor for taxes BEFORE you filed, they can not attach or offset that tax with any refund you are due AFTER you filed. There are some exceptions but even under the exceptions, the IRS has to file a Motion for Relief from the Automatic Stay and a Motion to Set Off (or Offset) the debt. If the IRS doesn't do that, then they would be in serious violation of the Chapter 13 stay against any creditor that is included in the plan from using post-petition property (money) to recover that debt.

The IRS typically doesn't do that in Chapter 13s. If you had owed taxes after filing, then the IRS could setoff your refund with any tax that you accrued after filing without notice to the bankruptcy court. They would not be in violation of the say under those facts.

If the refund doesn't show up within a reasonable time, then you may need to contact the IRS' insolvency unit. They are actually pretty nice despite all the things we hear that they are evil.

[karna68]

We've received our refunds in s previous plan and we did owe but the debt was rolled into our plan. We just filed in November so we'll be waiting until the last minute to file our taxes to avoid any possible confusion.