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State tax refund garnished Personal Bankruptcy

Discussion in 'Bankruptcy Law' started by aaidesmail, May 7, 2011.

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  1. aaidesmail

    aaidesmail Law Topic Starter New Member

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    Last year Chase Bank filed for a garnishment against me in to the 19th district court
    here in Michigan for a debt of $18,000. They won the garnishment and now The state of Michigan is writing for me to say that they are withholding the refund of $1510 because of the garnishment order. They are forwarding to me form 743 to fill up to determine how much they can release to my spouse since we filled a joint return. The question is can I file for bankruptcy right now to be able to redeem my refund back. If my wife has no debt with Chase bank can she still get her portion of the state refund. Thank you very much.
     
  2. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    I'm not a bankruptcy specialist but here's what I understand. If you file a joint tax return with your spouse, half of the tax refund is technically the property of your spouse. I wouldn't file for bankruptcy just to get back $755 but it seems as though this may be inevitable. But not only do you have costs of filing, these things will also take time. If you're expecting to see that refund quickly, I wouldn't count on it. Others may have more insight.
     
  3. Proserpina

    Proserpina Moderator

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    I'm curious - how is a regular creditor (as opposed to Federal, such as IRS/child support agencies) able to intercept a tax refund?

    My understanding is that only a Federal creditor can do that...

    Is Chase the owner of a student loan, by some chance?
     
  4. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    Great questions. I was assuming the same as you - there are tons of student loan defaults these days...
     
  5. aaidesmail

    aaidesmail Law Topic Starter New Member

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    No, in my instance the loan was just an ordinary loan.
     
  6. Proserpina

    Proserpina Moderator

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    Then I'm not clear how they were able to garnish a tax refund before it hit your bank account.

    There are very clear rules about who can and cannot intercept a tax refund, and generally a "regular" credit card/bank/other creditor does not have that privilege.

    Did you receive notice before the refund was intercepted? Who is holding the refund?
     
  7. rodgerbruce

    rodgerbruce New Member

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    Keep in mind if you file for bankruptcy it wont include your student loans.
     
  8. Proserpina

    Proserpina Moderator

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    Despite popular myth, it IS possible to discharge student loans.

    Google "Brunner test".

    Granted, it is easier to discharge IRS back taxes than student loans these days but it would be misleading to say that bankruptcy absolutely won't discharge said debt.
     
  9. army judge

    army judge Super Moderator

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    IRS taxes have been discharged in BK, but that isn't easy.

    Student loans are exceedingly more difficult and rarer.
     
  10. Proserpina

    Proserpina Moderator

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    It's not easy, by any means. But, it's also not impossible. Not that you said it was, but here's an example:

    A family example, in fact:

    No-asset Ch. 7, petitioner was pro se, managed to discharge back taxes and obtain a CRFTL all by themselves. No attorney at any time. Spent an awful lot of time reading books and asking questions on forums. :D


    Extremely more difficult, absolutely!

    But the point of my earlier post was to simply correct the blanket statement. Y'all know how I hate those darned things ;)
     
  11. army judge

    army judge Super Moderator

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    No doubt.

    However, with a depression looming, a greedy, predatory, hungry, confiscatory government, in that same Government's courtroom; I suspect that result would be even more illusory today!!!! ;)



     
  12. dazowak

    dazowak New Member

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    Chase receives an Order from the State and the Franchise board uses the order awarded by the local Trustee to capture any funds. You say creditor, but it's a granted Judgement award on behalf of the plaintiff.
     
  13. dazowak

    dazowak New Member

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    Brunner test is contrary: says 1. must cause hardship if had to pay, 2. will continue hardship for a period of time, and 3. the debtor has made good faith payments.

    1. Brunner had finished her Masters degree, placing her in a great financial earnings positions, just before filing, 2. she was in good health, capable of working under a full-time contract, and 3. had not made ANY payments to her Student Loans; had purchased a used car before filling too.

    Here then is a person awarded a gift that doesnt even meet 1/3 of the qualifications; craziness.
     
  14. Proserpina

    Proserpina Moderator

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    ....you make no sense.
     
  15. dazowak

    dazowak New Member

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    Typically, theres always a few....
     
    Last edited: May 21, 2011
  16. irish223

    irish223 Moderator

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    Michigan allows garnishment of state, and only state, tax refunds in order to pay creditors.
     

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