Some Chapter 13 Plans require debtors to pay into the plan their federal tax refunds. Typically, tax refunds are required on all cases where unsecured creditors are paid less than 70%. If tax refunds are required in the plan as payments, it will be stated on your confirmed plan.
How does Chapter 13 affect taxes?
In the case of a Chapter 13 bankruptcy, the debtor pays disposable income into a monthly “plan” to pay creditors. “In this case, there is typically a continuing obligation of the debtor to file timely taxes and provide the returns to the trustee, and to turn over all refunds for payments to creditors,” Archer said.
Can You Keep your income tax refund in Chapter 13?
Your bankruptcy attorney can explain in greater detail the type of circumstances that might allow you to keep your income tax refund in a Chapter 13 case, and the usual practices of your local bankruptcy trustees.
What happens when you file Chapter 13 bankruptcy?
People who file for Chapter 13 bankruptcy must pay all of their disposable income into the Chapter 13 plan—that is, any income not used for reasonable and necessary expenses, such as food, transportation, and shelter. (Learn more about the Chapter 13 Repayment Plan .) When you receive a tax refund…
How does Chapter 7 bankruptcy affect your tax refund?
The impact of Chapter 7 bankruptcy on an income tax refund depends largely on: When the bankruptcy petition is filed—the income tax refund is usually not at risk unless the petition is filed near the end of the year or while the refund is outstanding.
Can You Keep your income tax refund if you file bankruptcy?
In some jurisdictions, bankruptcy courts allow debtors to retain any portion of their tax refund resulting from these tax credits, since they are not attributable to over-withholding of disposable income. Indiana Bankruptcy Blog: What happens to your income tax refund if you file bankruptcy?
