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Our BK 13 was confirmed on Nov 2012 and included Federal &

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State Tax Debt. We...
Our BK 13 was confirmed on Nov 2012 and included Federal & State Tax Debt. We just had our 2012 taxes done & owe the IRS $3,600 (as a result of losing our home in a foreclsure sale in Jan 2012 & losing the deductions) AND we are receiving a $1,000 refund from the State. We don't have the money to pay the IRS and I'm extremly stressed about what impact thay will have on the tax debt portion of our BK 13.
Also not sure if we will recieve the State refund (would help us pay the IRS debt) & if the trustee will be notified of the 2012 IRS debt due & the refund from the state.

I'm hesitant to call our BK 13 attorney because I was also laid off in Jan 2013 and I'm concerned about our BK 13 case being cancelled/reviewed again since we barely qualified due to our income.

Any advice would be GREATLY appreciated. Thanks
Submitted: 4 years ago.Category: Bankruptcy Law
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Answered in 1 hour by:
4/14/2013
Bankruptcy Lawyer: JoeLawyer, Attorney replied 4 years ago
JoeLawyer
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
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Hello.

Post-petition tax liability (i.e. taxes you owe after the bankruptcy was originally filed) normally cannot be added to a Chapter 13 Plan. Also, tax refunds during a Chapter 13 are normally given to the debtor, even if that debtor owes old taxes, since those old taxes are dealt with in the Plan and the Bankruptcy Code prohibits the IRS/State from seizing refunds of people in Chapter 13.

So, it is likely that you will receive the $1,000 state refund even though you have old state tax liability in the Chapter 13 Plan.

Chapter 13 debtors in that situation normally use the state refund to pay toward the federal liability, and then contact the IRS to set up payments on the remainder of the federal liability.

However, some Plans are drafted where the debtor has to pay all or a portion of tax refund(s) to the Trustee to help fund the Plan. So, you would need to see if your Chapter 13 Plan has any provision requiring you to pay all or a portion of the refund to the Trustee, and if not, then you could pay a good chunk of the federal liability off with the state refund and then try to set up reasonable payments with the IRS on the rest.

Obviously we can't give legal advice on this website, only provide information, so for advice you should consult your attorney.

Thanks!
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.
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