@Anonymous wrote:
I'm very type A but it seems to me like most of Chapter 13 process is a mystery and heavily dependent on the moon or the tides or whatever, which is frustrating the heck out of me. It doesn't help that nearly every time I ask my lawyer a question (via email), they always want to talk over the phone about it to answer my question... not sure if it's just their "style" of communicating or if they don't want to put stuff in writing, it's frustrating to me. Partially because I don't like talking on the phone about this, it's stressful, and I want a written record so I can reference it later.
I had questions about what the trustee looks at when reviewing my tax return. I know this is done to see if I'm making significantly more money suddenly and, if I am, the trustee could ask for a higher payment to creditors. My tax returns look very different from last year because I have a rental property and my "income" from that was around net zero last year, but this year it is reporting a loss due to repairs/replacements. I also had a promotion/raise (internal so it wasn't THAT much) but my 401K contributions changed as well. Does the trustee just compare year to year tax returns, or do they reference the budget that was submitted and compare specifics? I'm worried about what will trigger a review.
I am also anticipating a significant bonus in a few months (8% or more of my salary). I think I'm "supposed" to report this to the trustee and they could decide to "take" it, but my lawyer suggested we might be able to argue that I need to keep it for home repairs (facing a roof replacement before the 5 year plan is up)... but if I don't report it, then I guess next year the trustee will see it reported as higher income on my tax return which might trigger a review and plan increase. I don't want to do anything wrong, but I also don't want to call attention to myself if I don't have to.
I just want to skate by under the radar and finish my plan. I'm 8/60 payments in and I want to be successful at this. I hate that there is no way to really look up this information and get clear concrete answers. I want to be smart and maximize each dollar so when I am out of this, I can hit the ground running.
I'm slightly envious of all the chapter 7 stuff... it feels much more one and done and move on. This 5 year confusion limbo thing is very stressful when you are not sure what to do and if what you are doing is "playing the game" right or not.
Thank you for listening, any advice is appreciated.
As a fellow chapter 13 debtor two years ahead of you, I understand how you feel. For this kind of stuff, you need to lean hard on your lawyer's answer and just accept what he says. The treatment of raises varies from trustee to trustee. Some trustees are so busy that they don't do much with confirmed cases. If your case is not confirmed, then all bets are off. Unless your lawyer is brand new, he will know the trustees very well. A good question to ask your lawyer is if any of his clients have ever gotten a trustee initiated motion to modify plan based upon the numbers in a tax return. If not, then you really don't need to worry anymore.
Most of the time, the tax return is submitted so they can sieze your tax refund according to the terms of your confirmed plan. That is low hanging fruit that doesn't require a hearing. If you don't pay the tax refund, then they file a motion to dismiss. So you always turn in the tax refund to stay in the plan. Raises matter with some trustees who don't have enough work to do while other trustees are too busy to care. If the trustee files a motion to modify plan, most debtors have attorneys and there is a good chance that it will be contested thus wasting trustee staff resources. The legal fees for the debtor comes out of the unsecured creditor's dividend unless it is a 100% plan. This year inflation is running at 7%. It would be a hard sell to increase plan payment if the raise was "only" 8% pre-tax. Your J will go up by 8% so what's the use of a motion
Your 401k does not show up in an e-filed tax return. No W-2 is attached to it. The 401k tax deferral is taken from the top. So if you contribute $15k and make $150k for real, your tax return says you make $135k and there is no hint of $150k anywhere. But if your trustee asks for paystubs once a year, then the trustee is going to find the increased 401k contribution.
The bottom line is lean on your lawyer. When you get your raise, tell him about it and he will either tell the trustee or do nothing. Whatever he does is the right decision for your trustee. My lawyer doesn't want to hear from me anymore unless I'm going to be late on my plan payment and he wants to know the impending late as early as possible. You are on the right track as far as not poking the bear. If you poke the bear, you have to turn in I, J and your paystubs when you modify your plan, try to retain a tax refund, or finance a car.
