Tax Refund - Spread Out or Lump Sum Taken?

[GoodyYearCap]

Our attorney is filing tomorrow. 1/9. CH 13. We have generally gotten around $5k in refunds each year, most of which are child credits/write-offs from my business. We have yet to do our taxes for this year but think a refund will be smaller.

I am curious- IF the Trustee wants our refund... does he/she take it every year, & if so, does she just take the refund, or divide the amounts we have historically gotten into 12 month periods and say "well it looks like you can afford $400 more for your monthly payment plan."

As of right now our payment plan is $406, not approved obviously, but that's the plan. We definitely can't afford any more than that. Advice?!

BTW, we are filing tomorrow (quickly) because my husband has resumes out there for higher paying jobs, and while nothing has been offered/no actual money agreed upon, it looks hopefully that in the near future, there might be a new contract position for him. SO, we need to file/have our meeting before income increases.

Which raises another point... does the Trustee monitor income/contract work throughout our five year plan???

[kathlee29]

I am no expert on BK 13 - we are not to our 341 yet, but, my husband had a very low paying job for 3 years prior to our filing, we filed in November 2011, most of the reason we had to file in the first place (lost a high paying job, took a new job at 1/6th his old salary to have a job, medical insurance, pay the bills); anyway, we thought like you did that we would be paying our play payments looking backwards and the pay he was making at the time we filed. Not so, the little company my husband is working for was bought by a bigger company and he got a salary bump; the big company buying the little company deal was signed sealed and delivered literally days after we filed and my husband had no idea it was even in the works (he is not an executive). We have had to up our payment to reflect his new slightly higher salary, NOT his old salary (the salary he was making when we filed). The old salary that got us into this mess. So, in essence he didn't get a salary bump at all b/c all the salary bump did was up our plan payments.

Others will have better advise, I am new here, but have made two plan payments so far.

I asked my attorney this morning (email) about our tax refund as we usually receive 4k a year back. Not sure if we can keep it or not. I will keep an eye on this thread for advise!

[GoodyYearCap]

This sounds like a very similar situation & it is frustrating what our attorney tells us/doesn't tell us. It's almost as if he wishes we wouldn't ask, knowing that it probably won't matter, however volunteering the potential increase in money information- isn't a good idea or something!

My husband and I make $14k over the CH 7 means test unfortunately, and my husband is hoping for a contract position that would significantly help us, but only if he gets the contract/money offer AFTER our 341 meeting. Our attorney made it SOUND like it wouldn't matter, but he also keeps saying "it depends on the Trustee."

I also know he charged us $6k for our case, $1900 up front, and the rest in the payment plan. Not cheap, and I sure hope the Trustee doesn't think we will have more than $406 to re-pay, because at that point, we won't be able to afford to even repay. Very stressful. As for the refund for THIS year, he also said "depends on the Trustee." I'm curious to know about future ones as well. Hmmm...

[GoodyYearCap]

By HOW MUCH did your payments increase, too, if I Might ask? Also, ours is contract work, so it is temporary, but it would be in a few lump sums :-/

[mountanddo]

I asked my attorney about when I had to report an increase in salary and she simply said to report it if it is a significant increase. The trustee said nothing to me about giving them my tax returns probably because if I get anything back it will only be about $100, if that. Also she only said I had to contact her if I move. There was no mention of turning in my tax returns. My confirmation isn't until February. Is all this information given to you in the confirmation letter?

[justbroke]

Whether you need to surrender your tax "refund" is usually dependent on what District you're in. In many Districts, the calculation of your disposable monthly income (DMI) must include your average annual tax refund divided by 12. In other words, the average tax refund is already included in your payment to the Trustee. In this way, the need for surrendering refunds is not necessary.

Then you have other Districts, such as some in Florida, which require a surrender of tax refunds and annual submission of tax "returns" as well. The Trustee uses the tax return to assist with determining whether you are making more money or some things changed about your dependents. Of course, it also indicates what your refund or underpayment is as well.

If your District requires the surrender of the refund, you would do it annually. You would only be allowed (technically) to receive the refund by check. You would be required to then send that check to the Trustee. (In some Districts, the Trustees have tried to intercept the checks by having them mailed to the Trustee instead.)

You certainly need to work with your local attorney with this. A combination of your local customs and rules along with your confirmation order is the only way to really tell.

[kathlee29]

Goodyear,

Our payments actually increased quite a bit b/c we were suddenly making 2k more a month b/c of the new job. We don't actually MAKE 2k more a month, we make about 1 k more if that, and b/c of the increase in plan payment after we told our lawyer about the new job/had to give him the new paystubs almost made me drop out of the BK bc we had to pay so much more to the plan. Our expense list is not as accurate as it could be b/c our lawyer told us the Trustee will not allow piano lessons and karate classes for our kids, but as we will be paying for them anyway - paying such a high plan payment will leave us pretty broke. Other expenses are all totally accurate, but our lawyer said those types of kid activities we cannot include in our schedule.

My husbands old job paid once a month and the new job pays bi-weekly so the trustee said we had to take one pay stub and times that by 2.15 and that is considered his monthly salary b/c when you are paid bi-weekly you get 3 extra pay checks a year rather than just 12 if paid monthly.

As far as contract work and a few lump sums, that you might not have to disclose, but run that by your lawyer as a hypothetical question. We were also told that if my husband got a small bonus at the end of next year we didn't have to disclose it but if it was a large bonus we would. We never got details on what was considered 'large.' And I didn't ask.

Like you said, sometimes you ask your lawyer a question and the lawyer is like WHAT DO YOU MEAN YOUR HUSBAND GOT A SALARY INCREASE SINCE YOU FILED!? And here we are at a super high payment and to make matters even 'worse,' I just started out of the blue receiving child support for my older son from his father and my lawyer said that it is considered income and I will have to UP my payment plan again (which will make the payments way too high and I will have to consider dropping out of the bk). Sad part is my son's father won't be paying for long as per is history as a deadbeat and my bk plan might go out the window bc of these random payments.

I am going to see how it goes at my 341 in a few weeks and try to explain to the trustee that the child support has never been regular and what is a few extra thousand dollars a year if he does actually pay - its for the child, not for his debt riddled parents to pay plan payments with IMHO.

Our BK is costing about 5K; 2500 upfront and the rest paid thru the plan. We were also swindled last year by a bk mill type lawyer and lost 5 k on him. So, in legal fees alone we have paid $7,500 and haven't even been confirmed yet. Might not be if my CS counts as income (my plan payment will be almost $3,700 a month if that is the case) and I won't pay that to all unsecured charged off/discharged CC debt/no asset case, and we are renters.

[GoodyYearCap]

Wow Kathlee29,

It is just never good timing... and what a good way to start of 2012, eh?! My birthday is tomorrow... the day our attorney is filing. Happy Birthday to Me ;-)

The lump sum my husband could get might be $15k (before taxes) then a few months later upon completion, could be that much more. IF the project goes as he was told it MIGHT, it could end up being a decent gig for the year, and I can't imagine the Trustee/attorney wouldn't up our payment plans because of it. However, we asked point blank about contract work, lump sums, etc... and he said "as long as it isn't an inheritance, lottery winning, etc... it shouldn't matter after the meeting." Hmmm.

We haven't gotten our letter to confirm when we show up at our meeting. What happens if you just drop out of BK? Do you just ignore calls, or try to re-pay people by working with creditors individually?

Your payments are incredibly high. Might I ask what kind of unsecured debt you're talking about? Our total is about $68k... not including cars (which won't be wrapped into the plan). We are not in danger of losing our home, and we are just starting to get the calls from creditors... it is becoming stressful- and I'm new to this whole world.

I think timing is key with all of this. I hate it. Can you tell the ex to stop paying you? Have you written down pros and cons about what is the lesser of the two evils???

[GoodyYearCap]

Oh and the one (main) thing that pushed us over a CH7 is an unexpected bonus my husband received in Dec. We were set to sign CH 7 papers last Tuesday... then our attorney called and said "I thought your bonus was $2700, not $5k." We said "We got $2700 in a check, not $5k." Didn't even think that they went off Gross instead of net. Pushed us over. He has taken all deductions we're allowed and can document, and sadly, this $5k that they INCLUDE into our income pushed us a bit too far over. Then our refunds have been about $4k-$5k but we literally pay cash for my kids' preschool up front, to save 5% WITH OUR REFUNDS, so even though it goes to a great cause and not a vacation or something- they will DO NOT CARE. I also thought of my daughter's piano lessons, or charitable work I do (I'm a photographer, and I do a charity session once a month, but my time is worth something, no?!) and that doesn't count either :-/

[kathlee29]

LONG and rambling...

Good year,

All of our debt is credit card debt that was discharged or charged off. The banks have insurance for people like us who lose jobs and can no longer pay the credit cards, and all of our credit card debt has been sold to junk debt buyers (collection agencies). We are 200k in debt to CC's. 1/4th of it medical bills. I have been offered .35 to .70 on the dollar to settle my half of the debts (we have nothing in both names, just my debt is mine and my husbands his).

The thought of 8 debt collectors coming after me scares me to death. 3 years ago when my husband lost his job and took the one he has now (1/6th the salary); he defaulted on his AMEX and this woman (debt collector) called us over 5 times a day, called my husband's parents, my parents, my sister and my husbands sister and brother. That sort of thing cannot happen to me which is why I am in the bk at all. That said my husband ignored this woman's calls and once she started harassing his family she got him to start a payment plan. That is just one creditor out of 7 for him.

I am no BK lawyer but that 15k you could make will have to be disclosed, the $ is too high. And you will pay all of that to the plan, at least that is my understanding. I could be wrong, as I said I am no bk expert although this is my second BK case, our first one was dismissed without prejudice in October for failure to pay ($3,500 was too high we literally had 0$ in the bank at and end of each month). Our old lawyer was not good, so we had the case dismissed before confirmation and got a new lawyer and refiled.

As far as I have been told by my attorney, anything that is left after your expenses is considered DMI which goes to the plan.

If you go into the 341 and say that lump sums of 15k are possible, the trustee is going to be all over it. Possible, tho doesn't mean you have the $ so maybe wait and see what happens before even mentioning at the 341.

Also, at the 341 you have to be 100% honest even if it doesn't benefit you in the end. We started out our BK journey in Sept 2010 as a Chapter 7. Our old lawyer never told us we had to disclose 'monetary' gifts that randomly came in from my husbands family. B/c and ONLY b/c of those gifts we were not eligible for a 7 and had to covert to a 13. But, when the trustee at the chapt 7 341 asked us about any other monies we were receiving and we told her roughly 25k a year from family she went nuts and got mad at our lawyer for not telling her about that.

re; the child support issue; I was emailing back and forth with my lawyer yesterday and as my son's father only has 2 years left to pay child support I said I was going to either A. release him from paying and we can make a deal he pays all my son's bills (piano, tutor, extras I have NOT included on my plan expenses) and we call it even, or I will drop out of the BK and my husband can go the BK alone.

You can drop out of BK at anytime even after confirmation, but if you need to revert to a 7 you will have paid all that money to the creditors for nothing.

The whole thing has been incredibly stressful at a time when I finally had another baby (the was the 40 k medical bills/only to naturally conceive go figure) and I just want this thing over with already.

Happy birthday btw, there are many benefits to BK and I hope I can stay in mine and keep the payment we are paying now. (2200) If I have to increase it to 3500 again like the last plan -- it won't work and I would rather use the money to try to pay down debts, and as we don't have a house to worry about losing I wonder if I am really even a bk candidate and should try to settle. There is so much to think about with all of it.

Mad at myself for getting into this jam, mad at my husbands previous employer for never letting on the trouble they were in, just to let him and his entire team go while my husband was owed substantial commissions (we never got them), perhaps if he knew of the Co's trouble he could have perhaps found a higher paying job than the one he has now which is incredibly low paying considering what he was previously making. Lastly, I regret using CC's that we were "going to pay off" with the commissions. Lesson learned; NEVER SPEND MONEY unelss you already HAVE the money! We never got 3 really high paying commissions and the CC debt sat, he lost the job, got a new job at very low pay, credit card limits went down, APR's up, the minimum payment on one of my high cards for over a year was $700 a month. I wish I filed years ago to stop that I paid $8,400 that year in just the interest on ONE of my cards, never to have the principal go down. Bad bad bad.

But, that is all hindsight now as they say.

[kathlee29]

Also to add; we have two relatively high payments to two leased cars, trustee has said that when the leases are up (in two years) that money will have to go towards upping the plan payments. We will have to see what the trustee allows for 2 new cars, likely $4-500 per car payment. Thus, adding another 1k onto the already super high payment. Without credit I can't see how we can ever get cars in 2 years and if I am paying another $1000 to the plan, again I would rather use my father in laws old cars and skip the bk altogether and try to get out of this mess myself somehow. My lawyer has said there is no way I can get out of 100k in debt myself and to take my lumps in the 13, make it work and cut out the extras for my kids (piano, karate, etc) but keep one activity each. My daughter will be going to college during the plan and she wants to go in California and I am not sure how college applications, college visits, plane trips to visit schools in California is going to fly with our trustee, who doesn't like us as it is from our last case.