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DrakeLAW, Attorney
Category: Bankruptcy Law
Satisfied Customers: 790
Experience:  Attorney at Drake Law Firm PLC
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Chapter 13 bankruptcy question in Oregon regarding tax

Customer Question

Chapter 13 bankruptcy question in Oregon regarding tax refundsI am in Chapter 13. I did not pay all my income taxes for 2016 and owe a significant ( $12k) balance, because I might have a substantial refund, and didn't wish to lose it. My understanding of the bankruptcy law is that any tax refunds will probably go to the trustee and be distributed to creditors.During 2016, I was employed as a contractor by my previous employer. The State contested that claim, and stated I was actually an employee. There has been a hearing, and I am awaiting the outcome. My understanding is that if the employer is convicted of improperly classifying me as a contractor, they will be required to pay taxes for me for that year. So if I paid my tax balance in full, and the State ordered the employer to pay taxes on my behalf, my fear was this would trigger a refund, and then I would lose the refund to the trustee.Unfortunately, I can't get a response from my bankruptcy attorney, he doesn't return emails or phone calls at this point. I have no idea what happened to him.I have talked to the state and IRS, and they have granted extensions for me.I have two questions:
1) Is my understanding of the law correct? I have the money to pay what is owed, but obviously I don't want to lose it if the trustee takes it in the event the employer is convicted by the state and forced to also pay taxes for 2016
2) My assumption is if the refund is confiscated by the trustee, it doesn't reduce the balance owed for the bankruptcy, it's just additional money for the creditors. If the refund instead simply reduced the balance owed for the bankruptcy, then I would be fine with it, as it wouldn't be "lost", it would just be paying down the total amount owed. Which of these two cases is it?
Submitted: 2 months ago.
Category: Bankruptcy Law
Expert:  DrakeLAW replied 2 months ago.

Hi, my name is ***** ***** I look forward to helping you, please give me a moment to review and possibly research answers to your question.

Expert:  DrakeLAW replied 2 months ago.

1. I am not quite understanding this question. What do you mean you have the money to pay what is owed? If you have money on hand, was that factored into your chapter 13 payment? At any rate, if you get a tax refund, yes it goes to the trustee and creditors as a supplemental payment. You want to avoid refunds if possible.

2. I answered this above, but to restate, yes any refund you get will be an additional payment to creditors.

Customer: replied 2 months ago.
Thanks, ***** ***** for the delay in responding.
I can clarify the question a bit - would you recommend delaying payment of the full amount owed on 2016 taxes, given that
a) a previous employer probably improperly classified me as a contractor and if convicted will be required to pay a substantial amount towards 2016 taxes
b) I'm in Chapter 13, so a refund on taxes goes to creditorsWhat is very important to me is to understand when you say supplemental payment to creditors - does that mean that it is a payment I**in addition to** the balance owed on the bankruptcy? If it instead just reduced the balance owed, it isn't as big an issue to me, I would be fine with finishing the chapter 13 early if possible.I