Taylor, MI asked in Bankruptcy for Michigan

Q: What happens if you don’t turn in your tax return and/or refund on a chapter 13 bankruptcy?

I have been in my chapter 13 for over 2 years and realized I was supposed to supply tax returns and refunds to the trustee but I haven’t. I’m not sure what my next step is as I’m afraid to bring it up and have my case dismissed.

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4 Lawyer Answers
Robert Keyes
Robert Keyes
Answered
  • Bankruptcy Lawyer
  • Ypsilanti, MI
  • Licensed in Michigan

A: You should turn in returns ASAP and contact your attorney if you have one. Otherwise contact the trustee and own up to your mistake.

It will only get worse if you ignore it and your case will get dismissed if you don’t makes it up somehow.

Thomas. R. Morris agrees with this answer

Ralph Reisinger
Ralph Reisinger
Answered
  • Bankruptcy Lawyer
  • Grand Rapids, MI
  • Licensed in Michigan

A: It depends on what Trustee you have and what you did with them money. In a Chapter 13 you are supposed to turn over all of your "Disposable Income" to the Trustee. However, if you have unexpected expenses, like car repairs, or a need to replace appliances, or periods of unemployment, that are not covered in your plan, most Trustee's will allow you to request that the funds can be used for these one-time expenses. I would suggest you contact your Attorney to see that the practice is where your case was filed, and perhaps you can request to keep the money. In the alternative you may have to amend your plan to pay in the amount you kept, over time.

Timothy Denison
Timothy Denison
Answered
  • Bankruptcy Lawyer
  • Louisville, KY

A: Turn in your returns ASAP and get permission to repay return to trustee.

Reed Allmand
Reed Allmand
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Dallas, TX

A: Under the bankruptcy code, there is a list of responsibilities and duties of a bankruptcy client or bankruptcy debtor. One of those is that the debtor has to file their last four years worth of tax returns, and they have to provide the most recently filed tax return to the trustee, as the date of filing. After the case is filed, if they receive a tax return, the tax return may be considered income. Trustee's in various jurisdictions have different policies on how that should be held. In the Dallas Fort Worth metroplex, the client is required to provide a copy of the tax return to the trustees office. Any tax refund that exceeds $2,000, the portion that exceeds the $2,000, the debtor is required to turn that over to the trustee. If the debtor disputes that they need those funds for another reasonable purpose they can petition the trustee and file a motion and potentially have a hearing to determine if that's a valid use of the funds.

Because of this, you need to contact your specific attorney as soon as possible.

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