Houghton Lake, MI asked in Bankruptcy and Tax Law for Michigan

Q: I’m in a chapter 13 in Michigan. The tax refund portion of my case is silent. Will I get a refund if so how much?

My chapter 13 In Michigan tax refund portion is silent. Will I get a refund? If so how much am I an entitled to keep if this is silent. I really wouldn’t mind them keeping it if it paid my case off faster but this pandemic has put me out of work and I need all of my refund or pretty close to it. Is there anyway I can have my plan modified to add how much of my tax refund I can get back?

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2 Lawyer Answers
W. J. Winterstein Jr.
W. J. Winterstein Jr.
  • Bankruptcy Lawyer
  • Boyertown, PA

A: Your Plan (whether before confirmation or thereafter) can be modified.

Your Plan commonly identifies the source of your funds, current and in the future, that will be used to make payments to the Plan, and routinely, that source is your current and future earnings.

It is at least arguable that "current earnings" would include your tax refund, even assuming that the refund is from earnings prior to the filing of the bankruptcy petition.

Yes, it would be best to clarify this issue by doing a modification of Plan, so that the Ch. 13 Trustee does not snare it.

A more serious threat looms, if your earnings have been interrupted, and you cannot pay future plan payments. You should certainly speak with your bankruptcy lawyer about that as well. If you default in your required payments to the Plan, and you cannot promptly cure the default, the Ch. 13 Trustee will file a Motion to dismiss or convert your case to a Ch. 7.

Timothy Denison and Trent Harris agree with this answer

Robert Keyes
Robert Keyes
  • Bankruptcy Lawyer
  • Ypsilanti, MI
  • Licensed in Michigan

A: In the Eastern District of Michigan the standard plan requires you to turn over your refund. It is not a matter of the trustee grabbing it.

The good news is you can always amend your plan to account for change of circumstances. Show expenses for any un-budgeted event such as job loss and you will probably be able to keep your refund or some part of it.

You need to talk to your attorney (if you have one) about your various options.

Trent Harris and Timothy Denison agree with this answer

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