As we get closer to April, our clients often have questions regarding their income tax refunds. If you are in aChapter 13 Bankruptcy in Dallas Texas, you may have to turn over a portion of your tax refund to the Trustee of your case. Each year, you are required to provide a copy of your current income tax return to the Trustee.
Generally in the Northern District of Texas, debtors may keep a tax refund under $2,000. However, if the debtor is behind on their monthly plan payments, the Trustee may use the tax refund to cover any delinquency. The Trustee would then return any unused portion of the refund to the debtor. If you receive a tax refund greater than $2,000, the Trustee may distribute the excess amount to the unsecured creditors in your plan. For example, if you receive a tax return of $5,000, you will be able to keep $2,000 while the Trustee will distribute the remaining $3,000 according to your plan.
Your specific situation may depend on the district in which you filed your case. Check with your attorney for questions regarding how your income tax refund will effect your case.