Where is my IRS tax refund?
While in Chapter 13 bankruptcy, the Internal Revenue Service (IRS) will send your refund to the office of the Chapter 13 trustee. The General Order states that any refund of $2,000.00 is to be reviewed by the Trustee’s office and they can keep any amount over the $2,000.00.
For example, if your refund from the IRS is for $4,042.00 and you are delinquent $450.00 in plan payments at the trustee office. The Chapter 13 Trustee will keep the $2,042.00, take $450.00 to bring your account current and sent the debtor $1,550.00. The fund reserved by the Chapter 13 Trustee will not be paid to your Chapter 13 plan base. The trustee will file motion to modify your plan and increase your plan base by $2,042.00 and then the funds will be disbursed to your unsecured claims.
The IRS tax returns are reviewed on a case by case situation and some debtors may get their entire refund sent to them even if this amount exceeds $2,000.00. The Chapter 13 Trustee’s office takes about 6-8 weeks before the tax refund amount is release to the debtor. A letter that explains the breakdown of any funds retained by the Chapter 13 Trustee from your tax refund.
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