Chpt 13 over 8/2020, but Inheratance soon..now what?

[lukesky]

Hey everyone, thank you for all of your help over the years. My Mother died last year and my Dad a few weeks ago. I am in a Chapter 13 10% in Kane county IL which may be over this August (36 month plan). After talking with my attorney he wants to wait and see what the inheritance check will be, if any after probate, to tell me what will are will not happen. All that I am paying off now is my car that I wanted to keep in the chapter 13 plan. Their are many high end unsecured creditors that where stopped being paid through the plan last October. I guess now, if I do receive a inheritance check it may pay off what is left of the car ($3,300) and the rest may go to the unsecured creditors? I donkt know. I try to look at both sides...I know my parents would want me to use the money wisely, like get out of debt and I would/will, but the ideal that the money may go to the unsecured creditors that are already closed (?) really upsets me. This is the last thing that I will ever have from my parents and I want to do the right thing with it. Any help, comments, advise, prayers would be very much appreciated. Thank you.

[sophieanne]

Hi lukesy...I am very sorry for the loss of your parents. I think all you can do is wait to see what is decided when you receive the inheritance check. Hopefully, if it's decided the money has to go to the plan, it won't be all of it. I was in a 100 % payback plan and when I was in car accident a small part of what I received had to be given to the trustee. I pray for peace for you as you go through this tough time.

[lukesky]

Thank you so much for your kind words sophieanne. It would be nice if I could use the money, if any, to pay the hospital, doctor bills and rehab a total of around $5,000 that I have incurred since my Chapter 13 started. Been paying on these every month plus the chapter 13 plan. I will wait and see what happens, all is new territory for me.

[justbroke]

lukesky, I'm saddened to read this post. It seems that my family (aunts, uncles,friends, and one parent) are all going to the other side.

As most States do, Illinois does have some protections for insurance policies. The question is just too specific for Illinois that I can't answer whether or not it is 100% exempt or if any portion is exempt.

As for your plan, if a large amount of money does come in, it gets paid in priority order. Secured debt, Trustee and attorney fees, and other administrative debt are first. Then it goes to priority unsecured debt (taxes), and then general unsecured debt.

[lukesky]

Thank you just broke. It is so tempting to just try and hide an inheritance, but I would never truly enjoy as it was meant to be from my parents because I would always be looking over my shoulders worried that someday, and it would happen, I would get caught. Not worth it. I will show my attorney and see what he says and if anything is leftover after my chapter 13 is paid off, then it will be mine to ENJOY! Thank you.

[lukesky]

Hey justbroke. I have a Court date in a few weeks. It is for " DEBTOR'S MOTION TO AUTHORIZE DEBTOR TO USE PROPERTY OF THE ESTATE". My attorney sent over my inheratance information and a request to pay off my Chapter 13 to the trustee. I asked for monies from my inheratance to pay off my medical bills post-filing of the chapter 13. The court documents sent to me by my attorney this week reflects all of this. I may even have some monies left over for me after my secured creditors, unsecured credtiors (10%) are paid. Please pray for me that the Judge sees this as a sign that I want to do the right thing. Thank you all.

[shipo]

Just a thought; if your final payment date is in August of 2020, and your presumed Discharge/Closure of the Chapter 13 will happen a few months after that; do you have the option of delaying the payment from the inheritance until after your case is closed?

[justbroke]

Just a thought; if your final payment date is in August of 2020, and your presumed Discharge/Closure of the Chapter 13 will happen a few months after that; do you have the option of delaying the payment from the inheritance until after your case is closed?

Delaying payment does not affect what is included in the bankruptcy estate. The bankruptcy estate consists of "all" property that could have been property of the estate within 180 days or when you became entitled to the property.

The keyword is "entitled." If you become entitled to an inheritance during the active part of a Chapter 13, anything, regardless of how many months or years it takes to obtain the property rights, is as if you had that property during the Chapter 13.

[shipo]

Delaying payment does not affect what is included in the bankruptcy estate. The bankruptcy estate consists of "all" property that could have been property of the estate within 180 days or when you became entitled to the property.

The keyword is "entitled." If you become entitled to an inheritance during the active part of a Chapter 13, anything, regardless of how many months or years it takes to obtain the property rights, is as if you had that property during the Chapter 13.

Hmmm, I find some of that language troubling. For instance, I am entitled to an annual bonus for my company; I filed for Chapter 13 back in 2015 just before the bonus was paid that year, and the Trustee took note (it wasn't huge like it will be this year). I am now in that limbo stage where my Chapter 13 is paid, but still active, and it was announced this week I'll be entitled to a bonus payable this year on 06-Mar; effectively the sixth bonus since my Chapter 13 was filed; in addition, I am expecting a rather large tax return this year (but have yet to file). Based upon the reading of your language, the Trustee might want a chunk of either payout.

[justbroke]

Bonuses are different and here's why. Every single bonus that I received includes the language that it is not guaranteed unless and until actually paid.

That makes a bonus contingent.

As for whether the Trustee wants all or a portion of your tax refund and/or bonus will depend on the explicit language in your Chapter 13 Plan of Reorganization (a/k/a your "plan"). The plan will usually be very specifically crafted to say whether you must surrender all "disposable income" to the Trustee. It may also include language that limits the amounts (e.g. all refunds over $1,250 or other similar language).

If you are required to and have been submitting copies of your tax returns over the life of your Chapter 13, you received refunds, and the Trustee didn't want the refund, then your Plan may not require you to surrender your refunds.

As for inheritances, they are no longer contingent once you become "entitled" to receive them. Federal bankruptcy law also must coexist with State non-bankruptcy laws. That's why you can have different conclusions based on the State and Appeals Court Jurisdiction in which an individual debtor lives.

[shipo]

justbroke, thanks, that kinda-sorta clears things up. Given the Trustee examined my 2014 tax return to determine whether to take any surplus disposable income, looking my 2019 tax return would mean he would be looking at six years of returns, and able to take anything over $1,250 (which he did once) from as many as six refunds; not exactly fair play when I'm in a 5 year Chapter 13. Needless to say, if he wants to look at 2019 I will object strenuously (and so will my lawyer, she's already said as much).

[justbroke]

shipo it reads as though your attorney and you have a plan to deal with the 2019 return. However, the Trustee may be legally entitled to refunds over $1,250 (if that's your allowance to keep) because of the plan language. If you filed in September of 2015, then I don't understand how that would be looking at 6 years of returns. Tax returns for the prior 2-3 years are required to be submitted for Trustee inspection for the specific purpose of determining your income level and to attempt to see if you have significant tax refunds.

The problem is that tax refunds are income and should be calculated into the plan as income. Many experienced Chapter 13 debtor attorneys will "average" the tax refunds over a few years and include that as additional monthly income (dividing the average by 12 to come up with a monthly amount). In that way, the Plan will usually not need language to reference refunds, but the Trustee may still insist on such language and include an amount not subject to surrender to the plan (e.g. amounts over $1,250 in any tax year).

If you filed in September 2015, the first tax year that the Plan could have included refunds would be for tax year 2015. That would be followed by 2016, 2017, 2018 and 2019 for 5 years of tax refunds which "may" be subjected to the disposable income provisions in a non-100% plan.

[shipo]

My filing date was in March of 2015, hence the Trustee was able to take money from the 2014 refund I got in 2015. This is why I do not believe he should be entitled to anything from my 2019 refund, regardless of how large it might be.

[justbroke]

My filing date was in March of 2015, hence the Trustee was able to take money from the 2014 refund I got in 2015. This is why I do not believe he should be entitled to anything from my 2019 refund, regardless of how large it might be.

Ah, because you hadn't filed yet? If you had filed and already received the refund, the 2014 refund would not be an issue. Most attorneys suggest waiting so that you can spend the refund on things such as attorney fees, medical care that you delayed due to income/finances, and other necessities.

[shipo]

Ah, because you hadn't filed yet? If you had filed and already received the refund, the 2014 refund would not be an issue. Most attorneys suggest waiting so that you can spend the refund on things such as attorney fees, medical care that you delayed due to income/finances, and other necessities.

Correct, I hadn't filed yet; in March of 2015 I met with the Trustee for the first, and so far only, time; at that meeting I gave him a money order for my first payment and as I understand it, that was the official start of my Chapter 13. On the day of my meeting with the Trustee he asked to see my 2014 tax return (which was going to be filed that same day) and agreed to allow me to keep my full return, which was under the $1,250 limit. Assuming I understand the process correctly, since he had intended to ask for any tax return money in excess of $1,250 for the first five years of my Chapter 13 status (i.e. tax returns from 2014, 2015, 2016, 2017, and 2018), I do not believe he has any right to look at what would be the sixth year, which is my 2019 return.

Side note: I contacted my lawyer this afternoon and she said I should not file my 2019 tax return until my Chapter 13 is discharged; and if necessary, file an extension. That way there will be nothing for the Trustee to look at if he asks. Since I suspect I am due a fairly large refund this year, filing an extension will not cost me anything.

[justbroke]

It sounds like a plan.

[lukesky]

Hey justbroke. I have a Court date in a few weeks. It is for " DEBTOR'S MOTION TO AUTHORIZE DEBTOR TO USE PROPERTY OF THE ESTATE". My attorney sent over my inheratance information and a request to pay off my Chapter 13 to the trustee. I asked for monies from my inheratance to pay off my medical bills post-filing of the chapter 13. The court documents sent to me by my attorney this week reflects all of this. I may even have some monies left over for me after my secured creditors, unsecured credtiors (10%) are paid. Please pray for me that the Judge sees this as a sign that I want to do the right thing. Thank you all.

Today is the day that the Kane County IL Judge decides the above for me. Please pray that she excepts my inheratance, pays off are some of my secured/unsecured creditors, closes/discharges my chapter 13, gives me monies to pay for my post-filing medical bills and if anything left over for me from my parents. Thank you.

[justbroke]

We are praying for success with the motion to use property of the estate!

[lukesky]

Hey justbroke. Well, the Judge did approve the motion to use my inheratance to go to my Chapter 13. I was at a 10% but now I am at 100%. So now the unsecured creditors that where dormant after being paid the 10% are now due for all of their money. So I just gave them over $15,000 and now when I get the 2nd inheratance check maybe around $5,000 it will pay off my Chapter 13 sometime maybe this year. In the meantime I still have to pay what I was paying monthly on my chpt 13 for almost 4 years until then. I have another question; there is plenty enough money now to pay off the only secured creditor in my chapter 13 plan which is my car and I think they come first in payments, do you think I will get my title to my car now right after that is paid? Any ways, my parents blessed me again even after they are gone now with this inheratance. Shame that all of it went to my chapter 13. Thank you.