Tax refunds in New Hampshire, redux

The United States Bankruptcy Court for the District of New Hampshire has reinforced its viewpoint that in Chapter 13 cases, income tax refunds belong to the trustee, and not the debtors.

The latest twist involves low income debtors who file Chapter 13 cases. Typically, they will file a plan to pay down their debts over a three year period; however, in hardship cases, they can stretch those paynments out over five years.

Since the typical length of a below median income Chapter 13 case is three years, the debtors in In re Rodger argued that tax refunds in years four and five of their plan should not have to be turned over to the trustee and then to creditors.

No dice, said the court: unless the debtors can come up with a plan that pays creditors 100% of what is owed, in New Hampshire all the refunds for any year during the course of the plan can be claimed by a Chapter 13 trustee.


By Doug Beaton

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