Trustee says I owe money I don't have? :(

[Lurker99]

I received my federal tax refund a few days after I filed BK. I received about $2,200, but I owed the state a little over $1,200 and used the fed money to pay state. I ended up with a windfall of $1,000. I think I should only owe $1,000, but she is demanding I send her the full $2,200 within the next 15 days. I have the $1,000 because I was expecting this, but there is no way I can come up with an additional $1,200.00.

I called the lawyer and they said it would cost more to fight it and since I didn't claim it in my papers I do owe the full federal amount.

I have no idea what I can do short of robbing a bank????

I don't think this is right, or in any way fair since I never really had the money. As soon as I received the federal refund I turned around and paid the state. The money was in my account less than a week. I sent the trustee all my statements and tax forms showing this, plus a cover letter explaining it all.

I'm not sure if it matters at all, but there is a vehicle that has my name on the title, it's paid off and worth about 20K, but I lost it in the Divorce...yet it's still listed in my BK papers even though I explained to the trustee and my lawyer that I haven't been in, driven, or in any way had anything to do with the vehicle in over a year. She just hasn't taken me off the damn title yet.

Please someone, help this newb out. I'm gonna start losing sleep over this $2,200 I supposedly owe

[keepinitreal]

Is it too late to amend your filing to exempt the Federal income tax refund?

[daytona]

Sounds like you have a lazy lawyer to me.....if you don't really have anything couldn't you exempt it? You are not discharging state tax debt (form 2-3yrs ago) and its clearly money you OWE...seems simple. Makes no sense...

[ja181]

yeah I agree, your lawyer sounds lazy.

[justbroke]

Maybe the lawyer isn't lazy. Perhaps the poster is getting what they paid for. If your service agreement doesn't t include litigation with the Trustee and additional hearings, then you would need to pay ala carte. It reads as though the poster doesn't have the money to even pay his attorney to fight. It could actually be counterproductive if you end up paying your attorney 4 hours at $250/hour so you don't have to pay $1,200.

I would ask your attorney if you have any exemptions left that can cover the $1,200 and ask your attorney to file an amendment. This will cost $26 for the filing fee and $150-$250 in attorney fees... if the attorney is going to charge you his hourly rate.

The reason why you can't just go and pay the State taxes from the refund, is that the refund is property of the Estate and taxes are not secured debt. However, once the Trustee receives the $2,200 they will take their fee (about 25% since it's under $5K... $880 or so) and then pay the unsecured creditors. The State would get paid if they are the only priority unsecured creditor filing a claim ($1,200) and then the rest of the $120 or so would get divided amongst the non-priority unsecured creditors.

Because you paid the State with pre-petition property of the Estate post-petition... I don't think the Trustee can use their general avoidance power to recover the money as a preference. Hence, they go after you!

It's a technical process. Don't try to make it make sense to you.

[keptdigging]

Unfortunately this doesn't help you, but there's a lesson for those who haven't filed yet...

This could have all been avoided by waiting until the tax refund had been received before filing. You would then pay the state taxes, and the remainder would be in your bk estate (unless you had other necessities you spent it on.)

I'm no guru, but while others think your lawyer is lazy... I'm not sure you have a case. The day you filed the tax refund became an asset in your bk estate. If you didn't exempt it, it belongs to the Trustee. I don't see how the fact that you spent it on a non-dischargeable debt changes that fact.

So basically I think the lawyer blew it up front by letting you file before you got the refund.

I don't have a tax return coming, but I do have assets. So I caught up on my property taxes, saw an eye doctor, and literally just came from the dentist--got my broken tooth fixed, bought my kid some clothes (though only from Target and Payless--wouldn't want to temp fate by buying anything upscale.) And I'd bet that nearly anyone filing bk has $2600 of necessary stuff they've put off that they could legitimately spend a tax return on--even if they don't owe state taxes.

[ja181]

Ok. Maybe the attorney isn't lazy, but they don't sound like they've advised their client very well.

[justbroke]

Ok. Maybe the attorney isn't lazy, but they don't sound like they've advised their client very well.

Too many maybes. This is just another lesson learned the hard way.

[ja181]

[justbroke]

I do wish all attorneys asked a bizzilion questions and considered every possible scenario. Most of the time, it's that the client didn't disclose things to the attorney and not that the attorney didn't ask the right question.

Some attorneys could be more... diligent, but, in many cases, it's a matter of what the services fee arrangement was.

[ja181]

I guess part of it is how much they're getting paid... I'm at $3k and counting, and we've spent probably 20 hours in face-to-face meetings.

[justbroke]

I guess part of it is how much they're getting paid... I'm at $3k and counting, and we've spent probably 20 hours in face-to-face meetings.

Yes, more face time racks up the bill quickly. Not all Chapter 7 debtors can afford the $150/hr (plus) to have face time.

Most Chapter 7 debtors are trying to get the whole things done for under $1,500.

[dakota112]

Kind of goes to show you that the only people making money in this country big time are lawyers and basketball players. Thats where are priorities are now. I will never understand it myself but if americans want to support so many lawyers and basketball players, than it must be a good thing and we should all support them.
AMEN

[justbroke]

Most attorneys earn such a high fee because the cost of getting a Juris Doctorate (J.D.) is expensive. Medical professionals holding M.D.s equally spend a lot on education. Until that education costs less than $200K for 6 years of post-grade school education... you're going to have to pay these professionals more.

As for basketball (or sport salaries)... it's a totally different thing. That's paid for through advertising and products.

But I do understand your point. Perhaps fix the root cause of the problem.

[newbie2]

I received my federal tax refund a few days after I filed BK. I received about $2,200, but I owed the state a little over $1,200 and used the fed money to pay state. I ended up with a windfall of $1,000. I think I should only owe $1,000, but she is demanding I send her the full $2,200 within the next 15 days. I have the $1,000 because I was expecting this, but there is no way I can come up with an additional $1,200.00.

I called the lawyer and they said it would cost more to fight it and since I didn't claim it in my papers I do owe the full federal amount.

I have no idea what I can do short of robbing a bank????

I don't think this is right, or in any way fair since I never really had the money. As soon as I received the federal refund I turned around and paid the state. The money was in my account less than a week. I sent the trustee all my statements and tax forms showing this, plus a cover letter explaining it all.

I'm not sure if it matters at all, but there is a vehicle that has my name on the title, it's paid off and worth about 20K, but I lost it in the Divorce...yet it's still listed in my BK papers even though I explained to the trustee and my lawyer that I haven't been in, driven, or in any way had anything to do with the vehicle in over a year. She just hasn't taken me off the damn title yet.

Please someone, help this newb out. I'm gonna start losing sleep over this $2,200 I supposedly owe

This could part of what the problem is with the refund money. It sounds like there is an asset that used up your exemptions (your ex's car) and you may not have much if any exemption cash left. Perhaps this is why your attorney said it isn't worth it to fight it.