Does this seem accurate?

[mylife]

We filed 13 in Jan 11. At the time the attorney advised that we were able to keep our tax refunds as we had plenty exemptions. The plan was amended to reflect that we are able to keep all exempt tax refunds. This year we were told we had to surrender them. Upon inquiry, the atty said that since this refund was from post petition income we had to surrender it. We accepted that explanation but does that seem true? Our atty is incompetent so we would like to get your thoughts.

Thank you

[HHM]

His explanation sort of makes sense, your assets and corresponding exemptions are established at the time of filing the case. I don't know how Maryland exemptions work, so the answer is going to be specific to that state and its interpretation.

But on the flip side, since post petition income remains part of the bankruptcy estate in a chapter 13, I am not sure why you couldn't apply exemptions to it.

However, the best thing you can do is adjust your withholding so you do not have significant tax refunds going forward.

[mylife]

Thanks HHM, adjusting our withholdings was our thought too. Also, isn't there a benefit to surrendering which pays down the plan base faster or does the plan base adjust?

[keepsmiling]

Only if you are in 100% payback. Otherwise, it's just extra dmi to pay.

[mylife]

Only if you are in 100% payback. Otherwise, it's just extra dmi to pay.

We are 100%, sounds good!

[TheBajan]

However, the best thing you can do is adjust your withholding so you do not have significant tax refunds going forward.

HHM,

I'm curious about this b/c in a booklet given to us by the trustee at our 341 it states specifically that we are not allowed to change our exemptions [w-4] with his approval. Is that just in a preference of this particular trustee?

The Bajan

[kornellred]

Trustees are all over the place with their requirements. There is not one single thing about income taxes, withholding, and other such matters in my trustee's handbook. However, since each debtor's circumstances are unique, it would not surprise me if my trustee has all stipulations concerning income taxes and refund disposal specifically delineated in the Chapter 13 Plan Confirmation document.