Very Nervous about large downpayment

[tfabian]

My trustee has not inquired about my tax return, which will be $11,700. I am about to purchase a vehicle for $18,000 and put down around $8,000. I received the form from the trustee that the dealer is required to fill out and notice that there is a box that asks for the downpayment amount. I am concerned that if the dealer writes $8,000, this will throw up red flags and result in me losing a portion of my return. Anyone have a similar situation? Any chance the dealer will fudge some numbers?

[HHM]

What is your percentage of payout to your unsecured creditors in your chapter 13 plan?

If it is already 100%, then you probably don't have anything to worry about.

If it is less than 100%, then you will most likely have issues. The tax refund (or at least any non-exempt portion of it) is disposable income, and not committing ALL your disposable income to the chapter 13 plan can be grounds for dismissal of your BK.

Going forward, you should reduce your withholding by maxing your IRS exemptions. The money does you no good sitting with the government.

[tfabian]

Not sure what the percentage is, but it isn't 100%. Once again though, they never asked, nor inquired about my tax return. I don't have much money saved for an emergency, which is what I planned on doing with the difference. Is there an acceptable amount to have in savings?

I have already adjusted my witholding. I am always nervous about doing it though because I usually end up owing the state around $2000.

[lrprn]

I have already adjusted my witholding. I am always nervous about doing it though because I usually end up owing the state around $2000.

Here's an excellent IRS resource to use for this year that can help you set your withholding appropriately for this year - http://www.irs.gov/pub/irs-pdf/p919.pdf . Good luck, tfabian - hope the trustee allows you to keep some of your tax return. Keep us posted on what happens, ok?

[kags1969]

I would be more concerned that the trustee will make a motion to dismiss if he finds out that you have that large of a tax return and didnt turn it in. Risky business if you ask me.

Kags1969

[aa06a47]

My trustee has not inquired about my tax return, which will be $11,700. I am about to purchase a vehicle for $18,000 and put down around $8,000. I received the form from the trustee that the dealer is required to fill out and notice that there is a box that asks for the downpayment amount. I am concerned that if the dealer writes $8,000, this will throw up red flags and result in me losing a portion of my return. Anyone have a similar situation? Any chance the dealer will fudge some numbers?

You can call the trustee's office and ask what the policy is concerning tax returns. Most trustee's require a copy of your Federal and State tax returns and some will require you to give them any amount over a certain dollar figure. (For example, my trustee wants anything over 1K, I've heard others say anything over 1,500...etc).

That is a very large refund and will raise the eye brow of the trustee for sure. Is there any particular reason why the refund won't be that large next year?....I mean, did you take a big loss on something..? With you getting that large of refund back, your big concern shouldn't be if the trustee get's it, it should be that the trustee will probably come back and raise your monthly payment by nearly 1000/month.

I wouldn't write the check to the auto dealership yet till your find out about this.

[tfabian]

The only thing that the trustee is requiring us to do is report our updated income once my wife re-enters the workforce in June 2009. They do not make a blanket request for tax return information as far as I can tell from everything I see. My attorney mentioned that they usually specify it during the creditors meeting....but they never did with us.

I did call the trustee yesterday and ask them if I received a large sum of money and put it down on a vehicle, if it would cause issues. They told me that as long as I had a letter from a family member that the majority of it was a no-strings-attached gift, that it would be fine. The refund won't be as large next year because I am changing my witholding. The refund is large because I have 5 deductions, 14K in mortgage interest, 17K in childcare, 8K in medical bills, 18K in unreimbursed business expenses, 4K in student loan interest, and 6K to church/charity. These are legitimate numbers. Roughly 85K in write-offs will get you a good return.

[aa06a47]

Well, this windfall is obviously not related to a gift, but to your earnings / deduction. Your attorney said they usually mention it in the creditors meeting, which probably means they have a local rule on it.

You should really contact the trustee and ask rules concerning a tax refund. It is best to be on the up and up on these things.

[CindyLou]

put a smaller amount down (20% will give you the best interest rate), finance for a little longer to make the note a little lower, then pay a large amount on the loan after month one.....this will give you the same result without the red flags.

[tfabian]

My Mom ended up giving me the money. I needed to put more than 20%down to to get the payment to the mandated $300. It is a 5 year loan, at 21% interest, which is the standard (and max allowable) for Ch 13 from any lender. The vehicle is 2004 Ford Expedition with 3 rows of seats (necessary for my large family) and has only 28,000 miles on it. Some would say that I should have saved and paid cash. Truth be told, the money was either going towards a reliable vehicle, or to unsecured creditors. The rate will not change with the amount of the downpayment for a 13. In addition, to finance for the full 5 years, the vehicle mileage cannot exceed 50,000.