Chapter 13 Income Tax Refund - yet another scenario..

[sscott91343]

Los Angeles area. Our original plan docs indicate we do have to surrender our tax refund to the trustee.

We never received a notice or warning after that.

Our federal and state returns were recently deposited to our account.

Some questions I have:

Will the trustee ever directly request this money? If so, when?

I know the legal answer, but what if we sat on the money, perhaps investing it in a bond or stock market?

Has anyone done something similar to this? How does the trustee work with refunds when they are deposited to your account and NOT intercepted by the IRS?

I have read several threads here regarding the subject but none specifically address my unique questions. Specifically, does the trustee actually ever pursue the refund?

I'd rather make interest with it myself and only pay it if absolutely necessary.

Appreciate all responses and any advice. Thanks!

[justbroke]

Will the trustee ever directly request this money? If so, when?

Were you also required to submit your tax return as well? If so, then they know when they see your tax return, that there was an overpayment, and a refund.

I know the legal answer, but what if we sat on the money, perhaps investing it in a bond or stock market?

Well, you just sit on it. However, if the Trustee (Tee) finds out the refund isn't in his/her hands, the Tee can file a Motion to Dismiss. You are actually in contempt of Court. But that's a different matter. More than likely, the Tee will file a Motion to Compel Turnover instead... unless they really don't like you (and filing a Dismissal instead).

Has anyone done something similar to this? How does the trustee work with refunds when they are deposited to your account and NOT intercepted by the IRS?

I have my refund and was to hand it over. I'm in the middle of completing a motion to keep refund, because my current monthly income (CMI) was $600 too high and affected my disposable monthly income (DMI). Therefore, my defense is that the refund is already included as "income" in my CMI, up to $7,200.

I have read several threads here regarding the subject but none specifically address my unique questions. Specifically, does the trustee actually ever pursue the refund?

Absolutely! They will file a Motion to Compel or a Motion to Dismiss.

[sscott91343]

Thanks very much for your thoughtful response.

No, I have nothing from the trustee that specifically requests the tax return itself. Just any refunds.

Did you complete the motion to keep refund yourself or with attorney assist?

If so, was it relatively simple and inexpensive?

One option I am contemplating is spending the refund on home repairs (not improvements). I have nasty plumbing leaks on my second floor.

[justbroke]

I do everything myself.

With regards to just spending it on home repairs... you can't do that. What you can do, however, is mail the refund to the Trustee and include a letter explaining how you'd like to use the money. This is the only appropriate way to do this.

A motion to keep refund is usually used when there is a legal basis for keeping it. It is not used to "ask" to make home repairs. The motion to keep, in this case, would make points of argument around tenancy by the entireties or that there's an injured spouse (when a non-debtor spouse also works and is entitled to part of the refund), and other arguments. If you're just trying to keep it to do home repairs, you probably need to consider a different tract. The "letter" is the best way, but you would have already surrendered the money (refund) to the Trustee and only hope that they will allow you to spend some of it!

Since you actually need the plumbing repairs, maybe you could (and I'm not providing any real advice) send the letter indicating that you need to spend the money on the plumbing repairs. Either way, you will eventually need to disclose that you have the refund.

[ccfriend]

I was wondering something similiar. I had to give any refunds over $1602. I did send in the overage for my federal refund but I haven't sent in my state refund. I am not sure if the amount over is just from federal or both. I emailed my attorney to see if I need to send in the state too and they did not respond. I haven't heard anything from my trustee either. If the trustee does decide to dismiss for failure to submit the refund will they give you a chance to pay it first?

[justbroke]

If the trustee does decide to dismiss for failure to submit the refund will they give you a chance to pay it first?

When it comes to just "money", the Trustee will almost always withdraw the motion if you "catch up" any missing funds.