I filed bankruptcy chapter 7 last year was told that the trustee is requesting copies of my returns. He then decided that he was not going to keep any of the return and mailed check back to us with his signature in the back endorsing it yet no bank will except it unless he is present.
I agree with Mr. McClure. Before you call the IRS, call the Trustee to see if he/she has a solution.
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The trustee may have to deposit that check in their account then write a separate check to you from their account. They might be able to call the bank to provide verbal authorization of the endorsement to the bank. Trustees earn additional compensation in cases where assets are liquidated on behalf of creditors. In this situation by surrendering any interest in the tax refund they aren't earning extra money so they probably want to do the least amount of work as possible to close out the case. They thought endorsing and mailing out the check was going to be the easiest thing to do.
Why do the trustees do this? Well some trustees are worried that in situations where Debtors may be required to surrender some if not all of their tax refunds those Debtors will get the refund and spend it all then claim they don't have it to turn over. In order to minimize that from happening those trustees will submit an intercept request to get those refund checks. It works out great for those trustees when they make money but sometimes creates a lot of extra, uncompensated work when they have to turn them over.
Additionally the judges in bankruptcy cases aren't big supporters of income tax refund intercepts in situations where the amount of the refund exceeds the amount the trustee is entitled to recover (its all about how much of your personal assets in an bankruptcy case the applicable laws allow you to protect) or is likely to be of nominal value to the bankruptcy estate - likely to be surrendered by the trustee anyway. Those intercepts hold up money that the Debtor may be entitled to and need to cover basic, necessary household expenses and it is being done just to protect the trustee's potential interest in those refunds.
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