In this episode of The Georgia Bankruptcy Podcast, we dive into the topic of tax refunds in Chapter 13 bankruptcy. Join us as we discuss what you need to know about handling tax refunds during your Chapter 13 repayment plan. 

We'll cover important considerations, potential pitfalls, and strategies to maximize the benefits of your tax refund. If you're navigating Chapter 13 bankruptcy, this episode is a must-listen. 

Tune in now to gain valuable insights and make informed decisions about your financial future.

So, it depends on what type of chapter 13 plan you have. Now if you're in a case where every single creditor is getting paid back all of the debt then, Hey, no problem, you're going to keep whatever your tax refund is.

But what about if you're in a situation where we're going to eliminate a significant amount of debt. Pretty much any kind of debt I can get rid of in a chapter seven, I can get rid of in a chapter 13 as well.

Welcome to the Bankruptcy Podcast, a podcast about untangling the complex world of bankruptcy in Georgia. Each week, we deliver the best insights and practical advice on how to navigate the legal waters of bankruptcy with expert guidance and real life stories. Now here's your host, Jeff Kelly.

So, it depends on what type of chapter 13 plan you have. Now if you're in a case where every single creditor is getting paid back all of the debt then, Hey, no problem, you're going to keep whatever your tax refund is.

But what about if you're in a situation where we're going to eliminate a significant amount of debt. Pretty much any kind of debt I can get rid of in a chapter seven, I can get rid of in a chapter 13 as well.

Well, number one, why do you want to get a big, huge fat tax refund every year? You want to make sure that there's enough money coming out to cover any tax liability, but you don't want to deliberately overshoot it. I know some people kind of like to think of their tax refund as a mandated forced savings plan. No, no, No.

That's number one, if you're in a 13 you're, basically giving a free loan to the government and then getting your money back a year later at no interest. And you're going to get pummeled for it in a chapter 13 composition plan, cause you're going to have to give anything above 2,000 directly to the trustee.

Will that money pay your case off sooner? Probably not, because in a composition plan, they're going to take that tax refund money and apply it to the unsecured debt that would have otherwise been wiped out or eliminated.

Next thing that I want to recommend, anybody who's in a chapter 13 plan period should be going to ndc.org on a regular basis to see where is their money going in the case? How is it being distributed? Who's filed claims? Maybe who hasn't filed claims? And every now and then it doesn't happen in every case, but there are quite a few cases where we're in a composition plan, we're gonna wipe everybody out.

So pay attention to when your bar date is, maybe we can adjust it so that you'll get all of your tax refunds, no matter what, if we can get it to 100% plan after the bar date.

Now another point I want to make is, you know, in some exceptional situations. Let's say you're getting a big tax refund and you need that money for a specific purpose, like I have to do these emergency repairs to the house, I have to do these emergency repairs to my car, blah, blah, blah. You know, whatever it is, we can file a motion with the court to ask for permission to do that.

So, in a situation like that, they have to notify all their creditors. That costs a lot of money, or can, in postage and things like that and then we have a hearing. A hearing for the judge, and then depending on what judge you get, might impact on whether it gets approved or not.

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While you're in chapter 13 we ask that all of our active clients give us a copy of their tax return every year. They're in the case, so we can see, Hey, have you gotten a big bump in pay? You know, a few percentage points, no big deal, we're probably not going to fool with it, but if you've doubled your pay, well, you might have to pay more money to the trustee.

If you're in a 100% plan, it would pay your case out faster. If you're in a composition plan, it may not affect the timing of your case finishing earlier at all.

At some point in time, the trustee will get a hold of your tax return, and they're going to know that you had a significant increase in pay, and if that happens, then, you know, potentially, your entire chapter 13 case could get dismissed if the trustee thinks you've been committing fraud by sitting on a higher income and not reporting it and trying to slide one past the goalie. I can just tell you as a general rule, it's a bad idea to try to slip one past the trustee.

And one of those rules is, Hey, if there's extra money floating around, either through tax refund or through increased in pay, trustee is going to want an increase in the monthly payment as well. Now, having said all that, there's no way you're gonna get stuck with a Chapter 13 payment that is unlivable.

You know, if you hear somebody saying, I can't eat because of my Chapter 13 payment, I can't pay my rent because of my Chapter 13 payment. They need to go meet with their bankruptcy attorney as soon as possible because it's not supposed to be that way. Now, if somebody says, Oh my gosh, I can't go to the beach this year cause I'm in a chapter 13, that's true.

But yeah, there are some restrictions and sometimes people chafe so badly under some of these restrictions because they want to go to the beach and they want to do this and they want to do that and they hate not having their freedom and they say, just get me out of the case, I quit.

So, quitting a case to regain freedom is a bad idea. Getting to discharge is always the best plan. Make it to discharge, get rid of the debt once and for all. You don't want these people building up more interest and then coming back again for the exact same debt years down the road, you don't want that.

If you ever hear somebody say, Oh, they're never gonna come after you after old judgments. Well, yeah, that may be true, but you know, in Georgia you can renew your judgment every seven years. So, a lot of people will call me and they're like, this Dutch, you know, 15 years old, it's impossible that they're able to come after me. And then I look at it and then you see, they renew the judgment and guess what? It's still valid.

Check out, if you hadn't done so already, please go to my website, www.KelleyCanHelp.com</welcome and download a copy of my book that I wrote on chapter 13 and chapter 7.

And also we have lot of podcasts on different various topics at at KellyBankerSheet.Com Thank you so much for tuning in.

Have a great day.

Narrator: Thanks for joining us this week on the Bankruptcy Podcast. Make sure to visit our website, kellybankruptcy. com, where you can subscribe to the show in iTunes, Spotify, or via RSS. So you'll never miss a show. While you're at it, if you found value in this show, we'd appreciate a rating on iTunes. Or, if you'd simply tell a friend about the show, that would help us out too.