Qualfiied retirement plan schedule B

[merlotwaytogo]

I want to make sure I understand line 55 on the Sched. B. Contributions to a retirement acct. or loan. I make a payment for my 410k loan and contribute 20% to my 401k acct. through payroll deductions. Does this count as an expense when determining how much I can afford to pay the trustee in Chapter 13? As a follow up what happens after the loan is paid off in three years will the trustee increase my monthly payments?

[Flamingo]

I want to make sure I understand line 55 on the Sched. B. Contributions to a retirement acct. or loan. I make a payment for my 410k loan and contribute 20% to my 401k acct. through payroll deductions. Does this count as an expense when determining how much I can afford to pay the trustee in Chapter 13? As a follow up what happens after the loan is paid off in three years will the trustee increase my monthly payments?

Your loan payment will count but there will probably be an issue as to you contributing 20% to your 401(k). You may be allowed to continue that but at a much small contribution percentage level because you are contributing funds that could be distributed to creditors. Discuss with your attorney.

[justbroke]

I will add to what Flamingo summarized very well. The 401(k) and 403(b) and other similar retirement instruments, are amongst debate in many Bankruptcy District. However, it is very clear from Congress that the intention is to promote saving, so retirement contributions are NOT considered disposable income.

With that said, some Trustees will question 20% to a 401(k), as deductions. However, you are within your rights to do that. If you've been contributing 20% for a good period of time... 6 moinths, a year, years even, then you have a good leg to stand on. Otherwise, the Trustee may believe that you're trying to divert otherwise non-exempt funds from paying a Chapter 13 Plan.

My Plan wasn't questioed at all with a 10% contribution. Your mileage may vary, as it depends on the District. For teh most part, Florida has well settled caselaw concerning 401(k) contributions. There's a great Massachusetts case which basically affirms what I wrote above.

They allowed a person who changed jobs before confirmation to up his contribution to his 401(k). This person got a new job after the petition paying significantly more money. What he did was change his contribution rate to cover the difference between the salaries (and this was a sizable monthly amount of about $500/month). The court agreed that he could contribute whatever he wanted, so long as the Plan was in good faith. Since his first plan said X amount to the unsecureds... then continuing to contribute X amount to the unsecureds after a job change and an increase in 401(k) contribution, could be in "good faith" as well!.

Again, this all depends.

[njguy1972]

I just started working with a lawyer and he says I am a ch 13, probably at 100%. The problem is his means test did not include a 401k contribution and some other necessary expenses I have. I mentioned it to him and am awaiting his feedback. With a 401k contribution at 6% (less than the 10% I have averaged for years) and the other expenses, I would be below 60% payback which will be a lot easier for me.

The lawyer is a former trustee so he knows what will and will not work.

[justbroke]

I just started working with a lawyer and he says I am a ch 13, probably at 100%. The problem is his means test did not include a 401k contribution and some other necessary expenses I have. I mentioned it to him and am awaiting his feedback. With a 401k contribution at 6% (less than the 10% I have averaged for years) and the other expenses, I would be below 60% payback which will be a lot easier for me.

The lawyer is a former trustee so he knows what will and will not work.

I'd like to keep on up your progress. You're in Connecticut, so the nearby Massachusetts case should have some weight. Since New England is like one big State anyhow.... well... not that big. I digress.

In case you care about the Massachusetts case, it was In Re Mati (07-13323) (US Bankruptcy Court - District of Massachusetts). In that case, the Judge found that "[t]he Debtor’s 401(k) contributions are not property of the estate and do not constitute disposable income under section 1325(b)."

The Court found that

... the Debtor’s 401(k) contributions do not evidence bad faith under the totality of the circumstances in this case. The Debtor is merely taking advantage of what the law allows.Congress has implemented a policy of protecting and encouraging retirement savings. As noted by the court in In re Johnson, 346 B.R. 256, 262-63 (Bankr. S.D. Ga. 2006), BAPCPA’s amendments to section 1325(b) alter the good faith inquiry under section 1325(a)(3) by narrowing the scope of judicial discretion and excluding certain sources of income that do not need to be committed to Chapter 13 plans.

In particular, debtors, pursuant to section 541(b)(7), may shelter contributions to certain qualified employee benefit plans. Id. at 263. ...