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Tax Refund Being Taken by Indianapolis Trustee

WHAT DO I DO IF THE BANKRUPTCY TRUSTEE WANTS MY TAX REFUND?

My Indianapolis Bankruptcy Trustee is taking my tax refund

It is very common for the Chapter 7 bankruptcy trustee to take your tax refund in Indianapolis, Indiana.  Because there is only a very limited exemption to protect tax refunds in Indiana, one year of tax refunds are very commonly taken to pay back creditors.   What do you need to do if your tax refund has been held as an asset by your Indianapolis, Indiana Trustee?   Although it is important to follow the SPECIFIC instructions given by your attorney and trustee, let’s discuss the basic, routine procedure for turning over your tax refund.

GET YOUR TAX RETURN FIRST TO THE TRUSTEE: THE TRUSTEE MUST CALCULATE HOW MUCH CAN BE TAKEN

After your tax refund is held by your Indiana bankruptcy trustee as an asset, you must prepare to send the Trustee your tax return as soon as you can complete it.  The bankruptcy trustee cannot make a calculation as to how much of your refund can be taken until he receives a copy of your tax return.   Remember, certain parts of your tax refund may be protected from the Trustee such as earned income credit (EIC).

Your Indiana bankruptcy trustee will calculate how much will be taken by “pro-rating” the tax year.  As an example, if you filed bankruptcy halfway through the last year, the trustee will only be able to take 1/2 of your tax refund.  The rest will be refunded to you.  A fraction of how far the year proceeded – such as possibly 262/365 days – will be calculated for however far into the year you filed.  However, if you filed after the entirety of the tax year (such as in the beginning of January), you could lose the entirety of the previous year’s tax refund.

MAKE SURE THAT YOUR ENTIRE TAX REFUND CHECK IS DELIVERED TO THE TRUSTEE

Many times in Indianapolis, Indiana the bankruptcy trustee will “intercept” the tax refund check by filing an intercept request with the IRS.  However, this is NOT always the case.  Frequently, you will still receive your tax refund either by paper check or direct deposit.   It is extremely important to not spend these funds: you must turn the entirety over to the trustee immediately (unless otherwise instructed by the trustee).  You will have returned to you your portion (if any) of the tax refund usually within 60 to 120 days.

If you receive a paper check, you must send the check (both federal and state) to the trustee’s office unendorsed.   If the funds have been deposited into your account, you may want to call your attorney.  Your attorney may either instruct you to send the entirety of the funds to the trustee immediately or wait until the trustee makes his tax return calculation.  Once again, this article is only to help familiarize the reader with proper turning over of their tax refund: follow the instructions of your attorney and trustee.

~Indianapolis Bankruptcy Attorney John F. Bymaster

 

DONALD TRUMP HAS NEVER FILED FOR BANKRUPTCY

UNDERSTANDING BUSINESS BANKRUPTCY

Emerging from the waves of Donald Trump media has come the following understanding: Donald Trump has previously filed for bankruptcy.   The reality, however, is that Donald Trump has NEVER filed for bankruptcy.   Let’s review Donald Trump’s past bankruptcy involvement, focusing on the importance of business entity bankruptcy.

Donald Trump Never Filed For Bankruptcy

TRUMP’S PAST BUSINESS BANKRUPTCY CASES

Donald Trump has been involved with various large corporate endeavors since the 1980’s.   Throughout his numerous business endeavors, four of these were casino’s which filed for Chapter 11 business bankruptcy:

  1. Trump Taj Mahal, Chapter 11 in 1991
  2. Trump Castle Associates, Chapter 11 in 1992
  3. Trump Hotel & Casino Resorts, Chapter 11 in 2004
  4. Trump Entertainment Resorts, Chapter 11 in  2009

 

On each of these cases, the company (in which Donald Trump was a large stake-holder) filed for reorganization bankruptcy.   Donald Trump was forced to reorganize the companies and make settlements with his creditors through a Chapter 11 plan.

“DONALD TRUMP” HAS NEVER FILED FOR BANKRUPTCY

Donald Trump’s name has never appeared as the filer on a bankruptcy petition.  Only businesses Trump was involved in have filed for bankruptcy relief.   To further clarify this statement, we will review the concepts of corporations and business bankruptcy.

The basic principle behind corporate business endeavors is to limit the personal liability and involvement of any investor or participant – even the primary investor or owner.   Therefore, when a corporation is created, a brand new “entity” is created.  This new “corporation” is legally a separate individual from its owner(s).

Without the legal “separateness” of corporations, there would be a much diminished ability for economic development.  Any individual – no matter how wealthy or wise – would be at risk of losing everything if they had ANY business involvement that failed.   Therefore, many business projects and services would never be attempted: they would simply be too dangerous with which to be involved.  Only the safest of business ventures would be pursued.   Many buildings and projects would never happen.  Many jobs would never be created.

THE IMPORTANCE OF BUSINESS ENTITY BANKRUPTCY

The Chapter 11 Reorganization bankruptcy case (which Donald Trump used in four of his businesses) is the primary mechanism for restoring productivity and reducing losses for failing business.   The focus is on the creditors: the Chapter 11 focuses on getting the best “return” or payoff for the creditors within a bad, failing-business situation.

Business bankruptcy – both Chapter 7 and Chapter 11 – is designed to restore productivity to all parties involved with a failing business.   Without business bankruptcy, there would be no orderly framework for what should happen when a business begins to fail.

Without business bankruptcy, there would be no choices: you could only continue to operate until everything falls apart.  All parties – employees, owners, and creditors – would receive much higher losses.   Nothing could be salvaged or retained.   The owners and employees would be at a complete loss.   The creditors would have to fight each other in state court to receive whatever (if any) is left.

Without business bankruptcy and corporations, developers such as Donald Trump would not be able to create a successful business.  There would simply be too much risk and unpredictability.   The numerous other businesses that Trump created – such as his golf courses and hotels – are employing approximately 25,000 employees.   These business have been and continue to be successful largely in part to business bankruptcy and corporation laws.   These laws are a large part of the basic framework for business success in the U.S. today.

~John Forest Bymaster, Indianapolis Bankruptcy Attorney