Monthly Archives: March 2016

Can a bankruptcy trustee put a hold on my tax refund and how does he calculate his share of the refund?

Yes, the trustee can put a hold on your refund, and he’ll calculate the bk estate’s portion based on the day you filed.

I filed a bankruptcy case (chapter 7) on June 15th of last year.  We knew that the bk trustee would want about half of next year’s tax refund.  My clients filed their 2015 taxes in February, and last week, we received the following letter from the bk trustee.  tax hold letter

 

In the letter, the trustee acknowledged that he put a hold on my client’s eventual 2015 tax refund.  He then gave his calculation of the bk estate’s portion of the refund.  Out of $11,252, he took $5,063.40.

To be more technical, the calculation looks like this:

June 15, 2015, is the 165th day of the year.  The trustee was entitled to take 165/365ths of that $11,252 tax refund.

To be a little less techincal, we filed almost halfway through the year, so the bk trustee took almost half of next year’s refund.

On a positive note, he did send my clients back about $6,000.

My Mom (or Dad) is on the mortgage, but we are living in the home. Can I file bankruptcy to stop the foreclosure?

Yes, but only for a little while.

I had a call today from a gentleman who is living in his mother’s home.  She is older and has some health problems including dementia.  Before her health deteriorated, she gave him a power of attorney over her assets and even quit claimed her home to him via a quitclaim deed.  However, the mortgage is only in her name. moms house

She had fallen behind on payments, and although he has kept up payments since moving in, the bank has scheduled a foreclosure sale.  He called me today to see how to stop it.

It’s complicated.

If he files bankruptcy, it will stall the foreclosure sale for 2-3 months.  However, the mortgage companies won’t let him propose a chapter 13 repayment on her mortgage unless he has assumed the loan.  His bk would stop the foreclosure since he’s on title to the home, but the mortgage company would file a motion for relief from stay, lift the bk protection, and then foreclose its interest.

He could file a bk for his mother based on his power of attorney, but the trustees/courts definitely frown on that here.  In speaking with some other bankruptcy attorneys today, they recommended quickly filing probate documents to have him appointed as her guardian.  That is possible, but it’s not a route I usually take.

Another wrinkle is that she isn’t living in the home anymore.  She is in a assisted living facility.  If I somehow filed a bankruptcy for her, the trustee would ask if that home which she doesn’t even use, is necessary for a reorganization of her assets.

I spoke with an attorney who handles many, many foreclosures on the other end of the spectrum, and he said that the son could apply for a loan modification in Mom’s name, and then have the son assume liability for the mortgage, but I know that loan modifications don’t happen overnight, and never, ever happen if you are only starting the process and have a sale date in less than a month.

What I’m going to tell him is that we can file a chapter 7 for him to stop the foreclosure sale.  In the meantime, he will start the loan modification process and see if we can get his name on the mortgage.  If so, we can convert the case to a chapter 13 and catch on on those missed mortgage payments.  Or, it is even possible that he will actually get a loan modification and not need a chapter 13 at all.