A Chapter 13 Bankruptcy typically lasts for a period of three to five years, and as we all know, a lot can change in that amount of time. Over the course of three to five years, an individual may have major life changes, such as having children, getting married, needing to purchase a new vehicle, or maybe even needing to repair an old vehicle. Typically for events such as these, individuals look to use their tax refunds to help pay for major expenses; however, in a chapter 13 bankruptcy, the Chapter 13 trustee requires you to turn over any lump sum of money to the bankruptcy estate. The general rule is that if a debtor becomes entitled to any sum of money it must be turned over to the bankruptcy trustee to be distributed to creditors. Common sources of money that need to be disclosed, and possibly turned over, include money or property from an inheritance, tax refunds, insurance proceeds, and so on. As a rule of thumb, if you receive any money you should inform your attorney, so he or she can contact your trustee and disclose this information. Typically, you are only allowed to keep a certain amount of your tax refund when you are in a chapter 13. The amount depends on when your case was filed and what the local rules were at the time. To find out how much of your refund you are allowed to keep without a motion to retain, contact your St. Louis Bankruptcy attorney to find out.
If you want to keep the money that you receive from one of the above listed sources, your attorney can help you by filing a motion with the court to retain the proceeds. This will have to be submitted to the court and it is generally set on negative notice. This means that your attorney will submit your motion to retain and if no one objects to the motion within 21 days you will be able to keep the money received. Any number of people may object, including the trustee and/or one of your creditors.
If you would like to retain your tax refund and/or insurance proceeds, your attorney will need a number of things to prepare your motion to retain. If you are attempting to keep insurance proceeds from a car accident, for example, your attorney will need to know how much money you will be receiving for the property. If the property is not a total loss and just needs repairs, your attorney will need to know the estimated cost of repairs. It is best if you can provide your attorney with a written estimate from a qualified individual so your attorney can file this with the motion. If the property is a total lose (i.e. a vehicle that you are not keeping) your attorney will need to know how you intend to spend the money received. Perhaps you need to replace your vehicle. Again, it is best to provide written figures for how you will spend the money. If you would like to purchase a new car with a loan, your attorney will also need to submit a motion to incur debt. It is important to note that if you receive insurance proceeds for property, i.e. a vehicle, and there is a total loss, any existing loan balance has to be paid off before any funds would be released to you if your motion to retain is successful.
Similar to the process for retaining insurance proceeds, if a debtor in a Chapter 13 bankruptcy is wanting to keep all or most of their tax refund, a motion to retain will have to be submitted with the court. Your attorney will need copies of your recently filed Income Tax Return in order to determine the full refund amount you are expecting to receive. He or she will then also need written estimates from qualified individuals for the things you wish to keep your refund for.
Once your motion to retain is prepared and filed with the court, please keep in mind that this process will take time. The motion will be submitted and it will be at least 21 days before a decision is made. From there your attorney will have to submit an order and the judge will need to sign the motion. Once this happens, your attorney will contact you to let you know the result of the motion (if it was granted or denied, and what that means).
If you choose not to inform your attorney regarding a motion to retain, and spend your insurance proceed or tax refund, it could result in the dismissal of your case. Your attorney can attempt to file a motion to ratify in an attempt to get late approval of your spending the proceeds; however, there is no guarantee that this will be approved with the court. If your motion to ratify is not granted, you will then be responsible for paying back the trustee the amount you spent. Because of this, it is very important to contact your St. Louis Bankruptcy attorney before spending any lump sum of money.