Chapter 13 lawsuit settlement - ins co. wants a W9
Posted: Mon Aug 31, 2015 10:56 pm
When an individual files a petition under Chapter 13, the bankruptcy estate
is not treated as a separate entity for tax purposes. Any income, such as
this lawsuit, is income to the Debtor.
Debtor should provide the W-9 to the insurance company and will have to pay
income tax on the proceeds.
Sincerely,
*Michael Avanesian, Esq. *
Simon Resnik Hayes, LLP
15233 Ventura Blvd., Suite 250
Sherman Oaks, CA 91403
Tel: 818.783.6251 | Cel: 818.817.1725
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On Mon, Aug 31, 2015 at 7:44 PM, jesseelaw@aol.com [cdcbaa] wrote:
>
>
> Weird to pay the money directly to the Chapter 13 trustee. Sounds
> like some or all the parties did not understand the difference between a
> Chapter 7 estate and a Chapter 13 estate and the different roles trustee's
> play in each chapter. I assume this was a cause of action arising
> postpetition, or not exempted if it was prepetition. If postpetition, and
> some portion is for reimbursement of out pocket costs I would take issue
> with trustee's label of that part as income. If prepetition and exempted,
> I would also fight the label on the exempted portion. Did the debtor have
> an Attorney? If so general practices is for it all have gone through the
> attorney's client trust account and the attorney completes the W-9. If no
> attorney or the attorney decided not follow standard practice it is the
> debtor who should provide the W-9. Depending on what the settlement
> proceeds are compensating it may or may not be taxable. The insurance
> company is generally required by the IRS to provide the 1099 at the end of
> the year to the distributees, so the W-9 completion is required so the
> proper tax id number is reported to the IRS.
>
> Sounds like the settlement agreement will need to be modified to issue
> the check to the debtor.
>
> Mark T. Jessee
> Law Offices of Mark T. Jessee
> "A Debt Relief Agency"
> 50 W. Hillcrest Drive, Suite 200
> Thousand Oaks, CA 91360
> (805) 497-5868 (805) 497-5864 (Facsimile)
>
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> In a message dated 8/31/2015 6:49:03 P.M. Pacific Daylight Time,
> cdcbaa@yahoogroups.com writes:
>
>
>
> Debtor settled a lawsuit during a chapter 13. Debtor is plaintiff.
> Defendant is insured. The agreement is for ins. co. to pay funds directly
> to Chapter 13 trustee for disbursement. Ins. Co. wants a W9 from the
> Trustee, but Trustee will not provide one due to cited IRS Code not
> requiring trustee to provide W9. Ins. co. doesn't want to pay without a W9.
> Trustee says settlement is income to Debtor. Does debtor need to provide a
> W9 to ins. co.? If so, won't check need to be made directly to Debtor?
> Is the W9 legally required for Ins. Co. to pay settlement, or just
> internal policy?
>
> This is not a personal injury settlement.
>
>
> Holly Roark
> Certified Bankruptcy Specialist*
> *and Sports Lawyer*
> holly@roarklawoffices.com **primary email address**
> www.roarklawoffices.com
> *Central District of California & District of Idaho* - Consumer
> Bankruptcy Attorney
> 1875 Century Park East, Suite 600 Los Angeles, CA 90067
> T (310) 553-2600; F (310) 553-2601
>
> *By State Bar of California Board of Legal Specialization
>
>
>
>
When an individual files a petition under Chapter 13, the bankruptcy estate is not treated as a separate entity for tax purposes. Any income, such as this lawsuit, is income to the Debtor.Debtor should provide the W-9 to the insurance company and will have to pay income tax on the proceeds.Sincerely,Michael Avanesian, Esq.Simon Resnik Hayes, LLP15233 Ventura Blvd., Suite 250Sherman Oaks, CA 91403Tel: 818.783.6251 | Cel: 818.817.1725
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