Can a trustee put you in prison?

[justbroke]

That happened to me too. That is, my 401(k) loan became taxable after I returned to the same company but they messed up the automatic payments which caused it to turn into a taxable distribution. That was part of my reason to file; taxes. It happens.

[Scottowl]

What did the attorney say?
is your husband doing ok?
Are you doing ok?

Gambling is an insidious addiction. it’s the reason I am in bankruptcy.
I was lucky enough to find a counselor to help me. I am by no means out of the woods with gambling, but I have been able to abstain starting at the time I filed.

My only defense against gambling is to not start up.

i am alone in life. That makes things easier sometimes. Perhaps you can get strength from your husband?

[southernmama]

It went horribly. Our lawyer said it was best to dismiss our case because the trustee was pissed and didn’t understand how I had more money in my 401k/IRA in 2019 than when I filed in 2016. I informed them I and my job at the time continued to put 5% in and my employer matched and doubled that. It accumulated until I left that job. But because there was more money, my lawyer said the trustee thinks that I was trying to hide my assets. I absolutely did not. I got the feeling that my lawyer is afraid of the trustee and didn’t have my back. He degraded me for my gambling actions, which I rightfully deserved, but he made me feel very tiny and dumb. So we dismissed our case.
On a brighter note, I told my husband everything and after a few days he told me that he hates that I lied to him but In the end, it’s just money and we can always fix our taxes and that everything had a solution whether it’s a hard or simple solution, there’s a solution. He was amazingly forgiving. He said money is not worth throwing away 20 years.

[southernmama]

Another question is we had almost $2k in our “balance on hand”. Does anyone know how long it takes to get that? We dismissed on the 11th.

[despritfreya]

So, the real issues were not that you took money out of your exempt 401k, failed to report the "income" on your taxes and spent it. The real issue was that during the course of the Chapter 13 you continue to divert disposable income into a savings account instead of using the money to pay creditors.

If you reside in a district that does not "permit" voluntary contributions into a 401k during the course of a Chapter 13, I understand why your attny is upset. My district (Arizona) allows such contributions but only on a case-by-case basis so it would depend upon the debtor's situation. I guess one lives and learns - if you file Chapter 13 number 2 you will know that such contributions cannot be made.

Please note - you still need to fix the tax return problem. If you file another Chapter 13 the 2018 tax debt resulting from the amended return would be pre-petition and paid as part of the Chapter 13 Plan (unless you pay it before filing).

Des.

[southernmama]

Before or even after filing, we were never told that we couldn’t still contribute to our 401k’s. So we kept everything as it was.

[despritfreya]

Before or even after filing, we were never told that we couldn’t still contribute to our 401k’s. So we kept everything as it was.

A quick search shows that Oklahoma may be one of those districts that questions the allowance of voluntary contributions. Google the two cases listed below:

In re Bayless, 264 B.R. 719 (Bankr. W.D. Okla. 1999)

Debtors maintain that voluntary contributions to a retirement savings plan are not part of the disposable income that Chapter 13 debtors are required to pay into the Chapter 13 plan. On the contrary, contributions to a voluntary retirement program, such as those at issue here, are part of Debtors' disposable income. . .

The above decision, issued in 1999, clearly says "no" to the diversion of income. In 2005 the law changed thus opening the door to such contributions, however such is not always the case. See:

In re Smith, 585 B.R. 168 (Bankr. W.D. Okla. 2018)

[A]lthough Congress excluded retirement contributions from the determination of disposable income in Chapter 13 cases under BAPCPA, the independent requirement under § 1325(a)(3) that the Court determine that a Chapter 13 plan be proposed in good faith remains fully intact. . . Accordingly, the great majority of cases hold that BAPCPA did not alter the court's obligation to consider retirement contributions as "disposable income" when determining ability to pay. . .

I think the newer case is similar to Arizona - one has to show good faith in asking to be allowed to continue to contribute to a voluntary retirement plan such as a 401k. I think it will depend upon the circumstances.

Hope this helps shed some light on the issue.

Des.

[justbroke]

In Florida, the age of the debtor can make a huge difference when it comes to contributions. If you're 50+ (or very close), you can argue that you will be back in the bankruptcy court in 10 years when you retire because you didn't have anything saved.

[southernmama]

Next question is if we had almost $2k in our “Balance on hand”, how long does it usually take for us to get that back? We dismissed in 12/11.

[justbroke]

It took me 4 weeks after I plead with the Trustee that I needed the money for my mortgage. While each Chapter 13 Trustee operates slightly differently, it will matter whether or not they wait until all checks are cashed. in my case, the Trustee wanted to make sure all checks cleared before sending me a final check. For some reason, they don't like paying $1 per check, so didn't want to send me two.

(My check was over $11,000 and the second one was over $5,000.)

[southernmama]

So sorry but I’m a little slow, before what checks cleared? The last disbursement was on 12/1 and they got another deposit from my husbands payroll on the 17th. I didn’t think the Trustee could hold it since its a voluntary dismissal but not sure.

[southernmama]

I also didn’t know if they will automatically send it or if I needed to call them.

[justbroke]

In my particular case, for Florida, my Trustee waits until all checks have cleared that were sent to creditors, before issuing the refund check. I had to convince them otherwise because they were holding over $16K of my money which I needed to pay my mortgage.

For voluntary dismissals, they should release it all. But you may be the same situation that happened to me. I converted and they never filed a Motion to Vacate Wage Deduction Order (WDO) and that's why they kept collecting twice a month from me ($5,500 then $7,200). Make sure the WDO is vacated... or at least find out who is responsible for filing that motion (Trustee, Debtor?).

I also had to file a Motion to Compel on my Trustee to motivate them. I don't think you're at that point, yet, but definitely make sure the WDO has been vacated or another payroll will come and the deduction taken.

(For what it's worth, taking the deduction from your payroll doesn't mean that it's instantly transferred to the Trustee. In many cases, larger companies -- and some payroll companies -- only send the deductions once a month. The Trustee may not even have the money, especially if payroll was only within the last week or so.)

[southernmama]

I see! I received a copy of the WDO but ADP hadn’t so I sent them a copy last week and I can see online that they stopped the garnishment. And you are right, they don’t send immediately. My husband got paid on the 4th and they didn’t send to the Trustee until the 16th and was posted by the Trustee on the 17th.
I just didn’t know if they’d automatically send it or if I needed to call. The girls in his office are not friendly at all so I wanted to waited until I had to call.

[justbroke]

southernmama cool beans! I'm glad that you can at least see that they stopped the deductions! Now, just for the Trustee to issue that check!