topic Re: Chapter 13 and Savings Account in Bankruptcy

Chapter 13 and Savings Account

ProudMomof5 — Fri, 18 Nov 2011 17:38:54 GMT

I've read alot of post on here talking about giving their income tax return to their trustee. My trustee or attorney didn't mention anything about giving them my income tax return or anything about obtaining new credit. I've learned alot from this board. Now my question is, how do you go about saving money or putting money in a savings account. When I filed my bankruptcy I ended up paying less on my monthly fee then I was on my car note so I have some extra cash. I want to start putting money in a savings account but I don't know if they'll see this or ask for statements and raise my monthly fee.

Re: Chapter 13 and Savings Account

Anonymous — Fri, 18 Nov 2011 18:01:56 GMT

Hi ProudMom,

I think you'll get a notice in the mail around tax time reminding you that you can keep $1,000 of combined tax returns and the remainder must be submitted to the trustee. Also, if you fail to submit by deadline, the trustee's office will contact you.

As long as you're making your chapter 13 payments (and any other payments you may have agreed to in the CH 13 BK, i.e. mortgage), you should be fine with placing those funds in checking/savings accounts. My understanding is that they won't raise your monthly fee unless your income or available resources change. If income/available resources do change, be sure to check in with the attorney or trustee - you don't want to be blindsided with a dismissal.

If you're not on a 100% repayment plan (some folks are not), you may wish to send additional funds into the BK account to repay creditors. Not required, but an option.

Hope that's helpful!

Re: Chapter 13 and Savings Account

ProudMomof5 — Fri, 18 Nov 2011 19:09:32 GMT

I'm not comfortable with handing over my return especially since I get a nice amount usually. Does the money actually go towards your payments and does that shorten the length of time you're on the plan.

Re: Chapter 13 and Savings Account

Anonymous — Fri, 18 Nov 2011 21:50:41 GMT

Last I heard, it wasn't optional as far as tax returns. However, it may have changed in the last few years. I would guess you would hear from the trustee's office - I know we received a mass mailing to remind us of the law. At one point, we paid very early in the year and they didn't process it properly - so we did hear from them on an individual basis, and we went through the books with them to prove we had paid.

The point, I would guess, it to prevent folks from artificially deflating their income and hauling in the bucks on a tax return. I saw that as appropriate in a CH 13 situation.

And, yes, it goes into your plan and is paid to your creditors. Minus, of course, the part that goes to the trustee (a certain percentage). It may or may not shorten your time plan. As I recall, there is a minimum of 36 months required in the plan even if you've paid 100% before the 36 months. And some folks are not on a 100% plan - so if you're on say, a 80% plan for some of your creditors, you may retain the same length of time but increase the percentage paid to those creditors. I would see that as a good thing. I'm a fan of the creditors getting paid as fully as possible. As I see it, the CH 13 exists to reschedule payments (and often reduce interest rates), thus making it easier on the debtor to pay the debts they've incurred. So, I'm for paying as much as owed whenever it's feasible.

Re: Chapter 13 and Savings Account

Anonymous — Sat, 19 Nov 2011 04:37:54 GMT

Proudmom,

I was just talking to someone about this question. It may be that if you're on a 100% repayment plan, then the income tax is not required to be sent in. If you're on a percentage payment plan, then it is required. Does this seem to fit in with what you're experiencing? That may explain things.

Re: Chapter 13 and Savings Account

missji — Sat, 19 Nov 2011 12:25:15 GMT

If you are required to pay your tax refunds into the plan, it is stated in your chapter 13 plan. Read your paperwork. If you have restrictions on obtaining new credit, which you probably do, it is also stated in your plan. It likely says that you can not incur debt of more than $1,000 without the approval of the court. As for reducing the length of the plan, it depends on how much you owe and the length of your plan. If you are paying back 100% of your creditors in your plan then it may. If not, then no it won't reduce anything. Again, read your paperwork carefully.

Re: Chapter 13 and Savings Account

Anonymous — Sun, 27 Nov 2011 09:57:48 GMT

Having completed a CH 13 pro se, I think I can speak to this. If your Plan says you give the Trustee your tax refunds, then you give the Trustee the refund required by the Plan. If your Plan is silent with regard to tax refunds, then it is silent, and would not require you submitting a dime of the refund to the Trustee. hey do generally request/require that you send them a copy of your return, but that is more for them to track income, as opposed to getting the refund amounts. It is far more common for Trustees to worry about CH 7 filers and their refunds.

John