December 17, 2018

IRS May Soon be Out of the Business of Seizing Income Tax Refunds for Benefit of Chapter 13 Trustee

As you probably know, there are two types of consumer bankruptcy cases available to you – a Chapter 7 which wipes out debt, and a Chapter 13 which creates a five year payment plan in which you pay back some or all of your debt with your “disposable income.”  When I prepare a Chapter 13 case, we work with you to create a liveable budget.  The money “left over” after you pay for housing, food, transportation, insurance, utilities and other necessities must be sent to the Chapter 13 trustee, who then disburses these funds to your creditors based on a plan of reorganization that we submit to the court.

What happens if you need to file a Chapter 13, you have not yet filed your tax return for last year, but you know that a refund will be coming your way.  The simple answer is that unless you are paying back your creditors at 100%, your Chapter 13 will demand that you turn over your tax refund check, and will use that money to pay your creditors.  If you know that a refund is headed your way, make sure to tell your lawyer before you file – there are some steps you can take to preserve some or all of your tax refund money.

Your Chapter 13 trustee will also want future refunds paid to the trustee.  This situation is easier to handle – you will want to adjust your payroll withholdings so that you do not have any refund coming.  As far as the Chapter 13 trustee is concerned, your tax refund is kind of like a savings account that artificially reduces your net pay amount.

All of the Chapter 13 trustees in the Northern District of Georgia require debtors who are paying less than 100% to creditors to include in their Chapter 13 plans a provision that authorizes the IRS to intercept any refund payable during the years that your plan is in effect and send this money to the Chapter 13 trustee.  And until now, the IRS has cooperated with the Chapter 13 trustees in redirecting refund money. [Read more…]

Use Online Access Keep Track of the Disbursements in Your Chapter 13 Case

Once you file a Chapter 13 bankruptcy and begin contributing monthly to the payment plan, you may wonder where your money is going, who’s being paid and how much money you still owe until you get your Chapter 13 discharge. As a Chapter 13 debtor, you can have access to much of the same information that the Trustee and your attorney have.

The National Data Center allows Chapter 13 debtors to access their case at no charge through its website: In order to view your case on-line, you must first register for a user name and password. Just go to the website and locate the box that asks for User Name and Password. If you are a new user, click the link “New Debtor Access – CLICK HERE” to register for a user name and password.

Access key on a laptop

Step 1: You will be asked a series of questions to verify your identity. Make sure to enter your name exactly as it appears on your petition, your social security number and your case number.

Step 2: Once you’ve entered all information requested in the first screen, you will be taken to the second screen. Select one of the creditor names listed, which must also be one of the creditors included in your Chapter 13 petition. Select your correct mailing address (NOT the address of the creditor). Finally, select the name of the Trustee that has been assigned to your case.

Step 3: Once the second screen is submitted, you’ll be taken to the third screen. Here you will be able to choose your own username and password, as well as enter your email address.

Once you’ve completed Steps 1 – 3 of the registration process, you will receive an email with your username/password and will be automatically re-directed to the National Data Center homepage. Log-in using your username and password and freely navigate the National Data Center website to view your case on-line and keep tabs on where the money is going.

Post by Susan Blum.

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