Chicago, IL asked in Bankruptcy for Illinois

Q: I’m filling chapter 13 and the trustees asked for a tax language.... what do that mean

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1 Lawyer Answer

A: The trustee wants your plan to include a provision that your Federal income tax refund or some portion of it be paid into the plan. Chapter 13 requires all of your disposable income be paid into the plan. The refund is part of your income. This provision trips up a lot of debtors because the refund goes directly to the debtor who must then turn it over to the trustee. Many people can't bring themselves to do that. The trustee then has grounds to move for dismissal for failure to comply with the plan. The case gets dismissed and the debtor is back where he started.

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