This time of year the most popular bankruptcy payment plan involves having the clients come into the office and deposit $200.00 now, and then paying the rest when they receive their tax refunds. By depositing $200, we can stop the creditor phone calls throughout the holiday season and well into the new year. In addition, we can start accumulating documents and begin doing paperwork so that once the client is ready to file, we will be ready as well. However, what makes this time of year unique is that “well into the new year” is tax time. As a result, in most cases, it is not a problem if the clients do not pay again until they receive their tax refunds. Those people who do not want to wait do not have to, but this is a nice payment arrangement for a lot of people in financial distress.
This payment arrangement accomplishes a number of things. First, it allows the clients to have some peace throughout the expanded holiday season (Halloween through President’s Day and beyond). What is more, other than the initial $200 deposit, it allows the clients to use their limited funds for Christmas and other holidays, rather than to pay their attorney. Next, this plan allows clients to wait until the time when they are best able to “afford” to go bankrupt, which is to say when they receive their tax refunds. Finally, this payment plan solves the “problem” of large tax refunds. The tax refund is an asset. If it is big enough, the Trustee would take an interest in it. However, the petition will not be filed until after the tax refund has come, and to some extent has gone. When the Trustee asks the Debtor to account for what happened to this large tax refund, the answer will be “part of it went to Haskell”. The Trustees recognize that reasonable bankruptcy attorney’s fees are legitimate expenses of the Debtor. As such, the “problem” is partially solved.