Hi there, this is Jonathan Ginsberg. I’d like
to talk to you today about tax refunds in Chapter 13 cases. And basically
let’s start out by talking about what a tax refund actually is. Basically
a tax refund is an interest free loan to the government. What it means
is that you’ve had too much money withheld based on your deductions and
your exemptions and you’ve given the government an interest free loan.
And a lot of people look forward to getting tax refunds because it’s
sort of like a savings account, money that has been taken out of their paychecks,
they’re going to get a check back of about two or three thousand
dollars and it’s kind of a bonus. They can use it to make repairs in the house
or take a trip or something like that. The problem is that in bankruptcy context
the trustee is also receiving this savings account. So as far as they’re
concerned you’ve had enough held out of your salary so basically this is money
that otherwise would have been disposable income that could have gone
to the trustee. So in bankruptcy court if you have a big refund
coming in the trustee says I’ll take that, thank you very much. In fact in
the northern district of Georgia Chapter 13 plans are required to provide except
in very rare circumstances that any tax refund you receive during the
course of your plan he paid to the Chapter 13 trustee. And again, there are
some exceptions to these rules, but the big picture is that you are
going to lose your tax refund to the trustee you’re better off adjusting your
payroll so that you don’t have a tax refund. Now one of the things that the trustee do
allow us to do is provide that if a tax refund is going to be $15,000 or less
we can provide that our clients get to keep that. So either you can have a
small tax refund because again sometimes it’s difficult to know exactly how
to calculate your with- holdings and so forth but if you expect to
get more than 1,000 to 15,000 dollars you need to adjust your with-holdings
so you don’t get that because you don’t want tax refund in bankruptcy. You’re
going to lose it and you’re much better off building a budget that contemplates
emergency expenses, home repairs, things like that from the get
go so that you don’t have this tax refund issues to deal with. If you get
one, you can file a motion to exempt it so that you can and keep it. The problem there is that let’s say you have
a tax refund of $2000 but you’ve got to pay an attorney $500 to go to
court to try to keep your $2000, your losing 25% of it. So it doesn’t
make a lot of sense to try to keep a tax refund after the fact, it’s much
better to avoid having one in the first place or keep one at $1500 or less
it loses more since it’s from Georgia. So, that’s what you need to keep in mind about
tax refunds in Chapter 15. Any questions about that, please fill free
to call me Jonathan Ginsberg. (770)393-4985. I’ve been doing bankruptcy
work, consumer bankruptcy work in the Atlanta area for over 25 years and I’m
happy to answer your questions and help you anyway that I can. Thanks for
watching and I’ll talk to you soon.