Tax Refund before filing, Lein Strip Questions, & Mileage reimbursement

[TooMuchCredit]

I tried to search for the answers before I asked as there seem to be alot of threads on tax refunds.


I will be filing a Ch. 13 in March. In my district, they take your refunds (the whole thing from my understanding) each year you re in the plan - so I will be giving up 2009,2010,2011,2012 and 2013. Sigh.

But what about 2008? I will have time to file and get my refund back by the time I file my Ch. 13. Should I do so? What are the pros/cons? I paid my Jan mortgage in Dec so have 13 months of interest on this return so it's a bit larger than in the past - $2.5K federal, $600 state.

The tricky part is, I am going to try and strip my 2nd in my Ch. 13. If successful, I will have to adjust my withholdings so that I don't end up owing taxes each year (I actually paid more interest on my 2nd than my 1st).

I believe it can't be counted as additional income, but can they use it to make me reduce my tax expenses on B22C? With lean strip, I will actually need MORE withheld than I have now. If I have to use actual, it will indicate I have more DMI than I really will have going forward.


In regards to the lein strip. The balance becomes part of the unsecured pool of what is owed, correct? Hypothetically, say my house is worth $179K as it says on zillow.com. My 1st is about $142K, 2nd is $78K and, a 3rd is $16.5K (HELOC). The 2nd paid off the HELOC originally, but they never closed it. So I stupidly accessed it thinking I would get my head above water. I looked it up and HELOC still has a security interest so I believe it technically is 2nd. So if my appraisal comes in at say $155K, the $78K loan would be unsecured. They might try and fight that but if I state the alternative is me giving up the house (I really do not want to do so ) - in which case they might get 26% back vs. about 37% of what I owe, do you think they will be less likely to fight it? They will have to fight to see who is truely 2nd, but I am told in my state it's whoever has the oldest claim. IF they were to be succesful in being 2nd, and I surrendered, they would only get 47% of what is owed based on the $179K value. However the 26% and 47% figured for surrendering dont take into account the legal and real estate fees so the % would likely be less. If I am able to strip, they get the 37% as well as all the other creditors. Without I think I can afford a $300 payment and 17% dividend, with the strip that jumps to $1200 and a 37% dividend to all unsecured.

Lastly, I get paid mileage reimbursement when I am required to go out of town which is usually 4 times a month. This adds up to a nice chunk of change. However, it is a "perk" that can be taken away at anytime. It is reimbursement so should not be counted as income. However, I use the car more than those 4 times a month so it should not wipe out my allowances on B22C.

Any tips are appreciated.

[Mi Bankruptcy]

That's pretty complicated. I read this on a blog. I don't know how accurate it is. Maybe you can pick up something. Too complicated for me.
Lien Stripping

[bklawn]

I tried to search for the answers before I asked as there seem to be alot of threads on tax refunds.


I will be filing a Ch. 13 in March. In my district, they take your refunds (the whole thing from my understanding) each year you re in the plan - so I will be giving up 2009,2010,2011,2012 and 2013. Sigh.

But what about 2008? I will have time to file and get my refund back by the time I file my Ch. 13. Should I do so? What are the pros/cons? I paid my Jan mortgage in Dec so have 13 months of interest on this return so it's a bit larger than in the past - $2.5K federal, $600 state.

The tricky part is, I am going to try and strip my 2nd in my Ch. 13. If successful, I will have to adjust my withholdings so that I don't end up owing taxes each year (I actually paid more interest on my 2nd than my 1st).

I believe it can't be counted as additional income, but can they use it to make me reduce my tax expenses on B22C? With lean strip, I will actually need MORE withheld than I have now. If I have to use actual, it will indicate I have more DMI than I really will have going forward.


In regards to the lein strip. The balance becomes part of the unsecured pool of what is owed, correct? Hypothetically, say my house is worth $179K as it says on zillow.com. My 1st is about $142K, 2nd is $78K and, a 3rd is $16.5K (HELOC). The 2nd paid off the HELOC originally, but they never closed it. So I stupidly accessed it thinking I would get my head above water. I looked it up and HELOC still has a security interest so I believe it technically is 2nd. So if my appraisal comes in at say $155K, the $78K loan would be unsecured. They might try and fight that but if I state the alternative is me giving up the house (I really do not want to do so ) - in which case they might get 26% back vs. about 37% of what I owe, do you think they will be less likely to fight it? They will have to fight to see who is truely 2nd, but I am told in my state it's whoever has the oldest claim. IF they were to be succesful in being 2nd, and I surrendered, they would only get 47% of what is owed based on the $179K value. However the 26% and 47% figured for surrendering dont take into account the legal and real estate fees so the % would likely be less. If I am able to strip, they get the 37% as well as all the other creditors. Without I think I can afford a $300 payment and 17% dividend, with the strip that jumps to $1200 and a 37% dividend to all unsecured.

Lastly, I get paid mileage reimbursement when I am required to go out of town which is usually 4 times a month. This adds up to a nice chunk of change. However, it is a "perk" that can be taken away at anytime. It is reimbursement so should not be counted as income. However, I use the car more than those 4 times a month so it should not wipe out my allowances on B22C.

Any tips are appreciated.

toomuchcredit, how did this turn out? and also is mileage reimburstment income for the means test?

[HHM]

When it comes to BK, money coming in, is money coming in, so the mileage reimbursement would more than likely be counted as part of yoru income.

Tax refund: if you get your tax refund "IN" before you file BK, then you can do whatever (within reason) you like with it, and it is NOT counted as income.

When it comes to lien strip, the inferior mortgages must not have ANY equity touching them. In your exemple...
1st. $142K
2nd. $78K
3rd. $16.5K
And if the appraisal comes in at $155K, you could ONLY get rid of the 3rd. The 2nd has some security interers ($13K worth), so the second would stay, IN FULL (that is, all $78K would survive the BK and you would need to start making payments on it again.
To get rid of both the 2nd and the 3rd, your house would need to "legitamely" appraise for $142K or less.

[bklawn]

When it comes to BK, money coming in, is money coming in, so the mileage reimbursement would more than likely be counted as part of yoru income.

Tax refund: if you get your tax refund "IN" before you file BK, then you can do whatever (within reason) you like with it, and it is NOT counted as income.

When it comes to lien strip, the inferior mortgages must not have ANY equity touching them. In your exemple...
1st. $142K
2nd. $78K
3rd. $16.5K
And if the appraisal comes in at $155K, you could ONLY get rid of the 3rd. The 2nd has some security interers ($13K worth), so the second would stay, IN FULL (that is, all $78K would survive the BK and you would need to start making payments on it again.
To get rid of both the 2nd and the 3rd, your house would need to "legitamely" appraise for $142K or less.

So what you are saying is mileage that is not part of my w2 and I get that for based on the gov mileage rate .55 or what ever is income? it does not show anywhere except deposits that is made into my bank account. If that is the case then it should be a credit for expenses on that car only.. we have two old cars and the one I use for driving to work has 450000 miles on it.. I dont see how that is income..That could be argued several ways.. like I could drive a company car from now to I retire and not pay for any gas.. is that counted as no expenses for any of my vehicles.. I think it is not income.. based on gov... ruling how it is paid out.. that is why I'm not taxed on it and do not have to claim it at the end of the year.. which I do not claim it.

[HHM]

No offense, but people over think this and screw this up all the time, for purposes of BK, any money coming to the debtor is income unless specifically excepted by the BK code, the tax treatment of the money generally has no bearing on whether something is included on the means tests or Schedule I of the BK petition. Even things like child support and social security (even though exempt) still count as income for BK purposes.

[bklawn]

No offense, but people over think this and screw this up all the time, for purposes of BK, any money coming to the debtor is income unless specifically excepted by the BK code, the tax treatment of the money has ganerally has no bearing on whether something is included on the means tests or Schedule I of the BK petition. Even things like child support and social security (even though exempt) still count as income for BK purposes.

ok that can be argued.. I asked the lawyer a couple of days ago and he said it would not.. but you are right the tustee could say it is income, but it would have to deducted as expense also for wear and tear on car.

Also the code is not clear..

[HHM]

Big picture, it will wash out

If it counts as income, then you will get the vehicle expense deduction.
If it does not count as income, then you won't get the vehicle expense deduction (because it is being paid for).
The thing is, the money comeing in MUST be accounted for on the petition, and since it is really more on the income side of things, the trustee will want it on the income side of things.

You posted this in the 13 forum, so I guessing the issue is not a means test issue, simply trying to figure out what is your gross income for schedule I and the chapter 13 plan, correct?

[bklawn]

Big picture, it will wash out

If it counts as income, then you will get the vehicle expense deduction.
If it does not count as income, then you won't get the vehicle expense deduction (because it is being paid for).
The thing is, the money comeing in MUST be accounted for on the petition, and since it is really more on the income side of things, the trustee will want it on the income side of things.

You posted this in the 13 forum, so I guessing the issue is not a means test issue, simply trying to figure out what is your gross income for schedule I and the chapter 13 plan, correct?

Yes, and thank you.. like you say the big picture to make clear is that it will equal out to 0

[TooMuchCredit]

toomuchcredit, how did this turn out? and also is mileage reimburstment income for the means test?

Turns out my company stopped requiring me to travel to the distant office, so no more mileage reimbursement, so I just did not include it.

[bklawn]

Turns out my company stopped requiring me to travel to the distant office, so no more mileage reimbursement, so I just did not include it.

Did the trustee say it was or did they ask for bank statements.. it is a big deal for me cause it would incresae my income by 600