This is the fourth installment of a series discussing the most common objections filed by Chapter 13 trustees in Chapter 13 cases. Thanks to Susan Gantt, a contract lawyer who handles Chapter 13 341 hearings for various Atlanta area lawyers on a contract basis.
4) No proof of tax escrow account. Although most creditors are paid through your Chapter 13 plan, there are some on-going creditors who are paid directly. These include your mortgage lender or your landlord, your electric utilities, your phone service and your garbage collection.
If you are self employed, you need to account for future income tax payments. If you do not, and you end up with a tax debt next year, the Chapter 13 budget you have filed with your case will not work.
If you are self employed, your Chapter 13 trustee will want to see proof of a self-employment tax escrow account. This can be a savings or checking account but you will have to have something to show the trustee.
Similarly, if your mortgage company is not escrowing taxes or insurance, you will have to set aside money each month to prepare for tax payments and insurance premiums.
I have found that a good vehicle for tax escrow accounts is a savings account. Since you may have trouble opening a savings or checking account after you file for bankruptcy, you should set up your banking arrangments before you file.
The trustee will want to see proof of this account and proof that you are funding this account each month – a bank statement showing $10 is not going to satisfy the trustee.
[tags] self-employment tax escrow, property tax escrow, taxes and Chapter 13, chapter 13 budgets [/tags]