Anyone had refund "intercepted" by trustee?

[bktmom28]

So, i know I posted another thread about this, but what I want to know is if anyone else has had this happen. Did the TT send form to IRS requesting refund be sent directly to Trustee? I had no idea this would happen and neither did my attorney. I feel kind of violated and caught off guard. We are discharged and done with our BK. Case just isn't closed yet. Any tips would be greatly appreciated!

[justbroke]

My Trustee doesn't intercept refunds. This varies, I guess, by District. it was common in Michigan, but that is changing rapidly! The bottom line is whether your Trustee (Estate) is entitled to your refund or not. The fact that it may be intercepted, is procedural or jurisdictional issue.

In a recent case, United States v. Carroll (U.S. Trustee), the United States won a case that basically found the IRS has immunity from any order of the Bankruptcy Court and therefore did not have to intercept refunds on behalf of the Trustee. (United States v. Carroll, No. 2:09-cv-13505 (E.D.Mich. Jan. 20, 2010)

[bktmom28]

My attorney hasn't gotten back to me yet, but when I first let her know what was taking place, she said she hasn't ever had a TT request that the refund be sent directly to them. That is why I am concerned. We are CH 7, and on PACER it says we are "asset" but when I called up north to our BK court, the man told me that when he looked up our case it said we were "no asset". I am so confused. We are discharged a month now, last day to file claims is 3-3-2010. Before we even filed we were told that this TT is a pain in the rump, and I guess she has to hold true to that! Everything was going so smoothly and I only hope that this is a glitch.

[justbroke]

Didn't your attorney exempt your "anticipated" refund? If so, then why are you worried?

[bktmom28]

As far as I know, Oregon does not have a wildcard exemption like most states or an anticipated tax refund exemption. I am not really worried about them taking our refund, as I was prepared for that, I am more worried that they will go after an insider payment to my husbands grandma that the TT said they may go after if the refund is enough to combine the 2. If they were to do that, the refund plus the payment would be about 3200.00. That just seems crazy to go after, when the amount of money that was discharged in the BK was over $42000. Anyway, I am just worried because my husbands grandma is not doing very well healthwise and this would be alot of strain on her and I just want them to come after us if they are going to. Sorry, this is alot, but I am really frustrated. I don't know why the TT went directly to the IRS.

[jctwo]

My Trustee sent a request to the irs just last week which delayed my refund. I notified my lawyer and she told me that the trustee needed my tax return. So I sent it. My lawyer added that the trustee only requested the check and will not cash it until he reviews my return and exemptions. We will see what happens. I'm in florida

[justbroke]

That just seems crazy to go after, when the amount of money that was discharged in the BK was over $42000.

Do you know how Trustees make money? First, they only get about $60 per case to review and administer. That means, they traditionally ignore cases where there isn't at least some threshold of money.

For cases which exceed the "threshold", and ones that they pursue, the Trustee is paid a percentage of what they recover. Remember, that the Trustee has costs too and may need to hire legal counsel in order to pursue the money. So, they generally don't like to deal with small amounts of money.

So, for you, $3,000 seems like a little amount of money, but the Trustee would get 25% of that or $750. Otherwise, they only get the $60 from the case fee. So think about it... would you want to make $60 or $810 for the case? The amount discharged is irrelevant.

[bktmom28]

I get that. I know they make very little in a no asset case. I just wish I could have known that this was a part of it. Will she take her amount and then disperse the rest to the creditors or will she give it back to us? Thank you for your response. I really do appreciate the insight.

[justbroke]

I get that. I know they make very little in a no asset case. I just wish I could have known that this was a part of it. Will she take her amount and then disperse the rest to the creditors or will she give it back to us? Thank you for your response. I really do appreciate the insight.

She will take all that the Creditors are entitled to. If you have $42K in unsecured debt, the measly $3K is going to the Trustee and the Creditors. If no Creditor files a claim, then you'd be refunded the balance.