So, I got my Chapter 13 plan confirmed, but now the trustee wants to see my tax returns every year. Why?
The reason for that, is that during the term of you Chapter 13 case, 36 to 60 months, your income might fluctuate significantly, and you’re supposed to pay over all of your net disposable income in order to qualify for a Chapter 13 discharge.
So, if your income spikes all the way up one year and that is revealed in your tax returns, the trustee needs to know it so that the trustee can go back into court and ask the judge to modify your Chapter 13 plan. Now that’s not a good outcome, but it doesn’t happen that often.
On the other hand, in some Chapter 13 cases you need to turn over your tax refunds every year because that’s also part of your net disposable income, and the trustee needs to monitor your tax returns in order to see if you’re getting refunds. So, there are reasons why the Chapter 13 trustee does need to take a look at your tax returns every year.
Thoughts from a Maryland Bankruptcy Lawyer