Do I Have To Turn In My Income Tax Refund To The Chapter 13 Trustee Every Year that I Am In Bankruptcy?

by Peter Orville, Binghamton Bankruptcy Lawyer

September 21, 2008

Each year that you are in a Chapter 13 bankruptcy you are required to turn in a copy of your income tax return to your Trustee. Whether you must turn over the return to the Chapter 13 Trustee depends on your Trustee.

In the Northern District of New York in the Utica and Syracuse divisions, the Chapter 13 Trustee Mark W. Swimelar usually allows debtors to keep the first $1500 of their combined State and Federal tax refunds. Any amount received over $1500 must be turned in to the Trustee. If only one spouse filed the Chapter 13, but both are on the tax return, the Trustee only requires anything over $1500 from the Debtor’s half of the refund. So if a married couple receive $4000 in refunds, the non-filing spouse can keep half ($2000), the Chapter 13 debtor can keep $1500, and the other $500 must be turned over to the Trustee.

If you are in a Plan that pays 100% to the unsecured creditors, then the refund amount you turn in to the trustee will reduce the amount of time that you are in bankruptcy.

If you are in a Plan that has a payback to unsecured creditors of less than 100%, and you were a below the median debtor when you filed, then the refund will only reduce the time you are in bankruptcy if you have passed the 3 year point.

If you were an above the median debtor, or if you have not been in the plan for at least 3 years, the refund amount paid to the Trustee will not reduce the time you are in bankruptcy.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.

Last modified: September 21, 2008