Tax Refund

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No Amortization of Tax Refund in W.D. Texas

In an opinion that reads like a father chastising his ungrateful children, the District Court for the Western District of Texas scolded the debtors for their proposed treatment of anticipated tax refunds and required them to adhere to the District Plan under which they could retain up to $2,000 of their refunds, but must turn over to the Trustee any amount remaining as disposable income. Vega v. Viegelahn, No. 18-796 and Diaz v. Viegelahn, No. 18-798 (W.D. Tex. Sept. 19, 2019) (consolidated for argument and decision).

Contrary to the District Plan structure, the debtors in this case sought to amortize their tax refunds as income over one year. Upon objection by the trustee, the debtors ultimately amended their plans to conform to the District Plan. They then appealed the Bankruptcy Court’s order of confirmation arguing that the District Plan’s treatment of the tax refunds violated various provisions of the Bankruptcy Code, the Local Rules and the Official Forms. [Read more…] about No Amortization of Tax Refund in W.D. Texas

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Court Rejects Nonstandard Provision for Retention of Tax Refund

The chapter 13 debtor was not permitted to include a nonstandard plan provision to retain her tax refund where the refund was not reasonably necessary for the support of the debtor or her dependents. Penn v. Viegelahn, 2018 WL 5984844, No. 18-354 (W.D. Tex. Nov. 13, 2018). [Read more…] about Court Rejects Nonstandard Provision for Retention of Tax Refund

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Debtors Restricted by District Form in Treatment of Tax Refund

A District Form Chapter 13 Plan’s treatment of debtors’ tax refunds as disposable income was not contrary to the Code and could not be altered by individual debtors. In re Vega-Lara, No. 17-52553 (Bankr. W.D. Tex. May 4, 2018).

Carlos Vega-Lara and Aura Cecilia Vega filed an amended chapter 13 plan using the court’s District Form plan as required by the bankruptcy court. Their plan proposed to pay priority claims and administrative costs at 100% and unsecured nonpriority creditors at 24%. [Read more…] about Debtors Restricted by District Form in Treatment of Tax Refund

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No Requirement upon Conversion to Chapter 7 to Turn Over Tax Refund

The BAP for the Ninth Circuit found that a pre-petition tax refund which was obtained and spent by chapter 13 debtor post-petition but prior to confirmation of chapter 13 plan, was not subject to turnover upon conversion to chapter 7. Warfield v. Salazar (In re Salazar), No. 11-1551 (B.A.P. 9th Cir. March 14, 2012), The court found that the case turned on interpretation of section 348(f)(1)(A) which provides that upon conversion from chapter 13 to chapter 7 the estate consists of property in the possession or control of debtor at the date of conversion. Noting that section 348(f)(1)(A) creates an anomaly whereby a debtor who remains in chapter 13 would have had to have included the refund in the plan, and a debtor who had filed originally in chapter 7 would have been required to turn over the refund, the court found that the plain language of that section pinpoints the date of conversion as the relevant point. Applying rules of statutory construction, the court found that this result was not absurd and that, in the absence of bad faith, the debtors therefore were not required to turn over the tax refund.

Salazar opinion