Concord, NH asked in Bankruptcy and Tax Law for New Hampshire

Q: Why would a chapter 13 trustee take excess tax refunds if the payment plan is 100% funded payback?

Isn't your disposable monthly income calculated using your gross income which essentially includes the "yearly tax refund" amount? If we are using our disposable income to fund the plan at 100% payback, how is it legal for the trustee to take more to get it faster? Legally don't I get five years to pay it back especially if all parties in the plan agree to these terms? Also, if it is my husband and I both filing jointly, and they say $1200 excess will be taken, is that $1200 per person or jointly $1200? So in our situation anything in excess of $2400 will be taken or anything in excess of $1200? Thank you.

Related Topics:
1 Lawyer Answer

Robert O'Brien

Answered
  • Bankruptcy Lawyer
  • Convenience, NH
  • Licensed in New Hampshire

A: Greetings!

Chapter 13 plans are funded by "disposable income" of the chapter 13 bankruptcy estate, which is based on "household income". Included in most NH chapter 13 plans is a provision that requires chapter 13 debtors to pay over to the trustee all income tax refunds that exceed $1,200, regardless of whether it is an individual or joint case. Since 'disposable income' represents the household income after taxes and required deductions, less approved living expenses for the household; any income tax refund for a particular year would have increased disposable income had it not been deducted as withholding taxes excluded from the determination of chapter 13 disposable income. To minimize the amount of expected income tax refunds, each wage earners w-4's should be carefully reviewed and adjusted accordingly.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.