Tax Returns After Filing Chapter 13 Bankruptcy
YOU CAN KEEP YOUR TAX RETURN!!!
A Massachusetts Chapter 13 bankruptcy case lasts between three to five years. That is three to five New Years, three to five Fourth of July fireworks, and three to five Superbowls. It is also three to five Tax Days (usually April 15). Tax Day is an important concern for anyone in Chapter 13 bankruptcy, and the debtor ignores the importance of this day at his own peril.
During a Chapter 13 bankruptcy the debtor is required to commit all disposable income to repay creditors. Basically, the bankruptcy debtor pays what he or she can afford to pay over the repayment plan period. A Massachusetts debtor who receives a large tax refund is essentially telling the bankruptcy court that this money was not needed, since the debtor elected to allow the U.S. government to hold onto it (interest free!) during the tax year. This income tax refund is disposable income, and the trustee may ask for it!
Avoiding this problem is easy and, yes you can keep your tax refund. In chapter 13 we simply account for your potential income tax return and add it back into your monthly budget. Therefore the money is accounted for and you demonstrate to the Court your need for the return.
If you are contemplating a Chapter 13 bankruptcy filing, call Law Office of Robert W. Kovacs, Jr. toll-free at (877) 315-2641