401k Contributions

[salsa]

Just wondering those who are in a chapter 13, what percentage are you able to contribute to your 401 k? I have 4 meetings next week with bk attorneys, but from what I've seen so far, you get lots of different answers.

Thanks

[espo1357]

Just wondering those who are in a chapter 13, what percentage are you able to contribute to your 401 k? I have 4 meetings next week with bk attorneys, but from what I've seen so far, you get lots of different answers.

Thanks

Well, my trustee (her assistant) said that I am not allowed to save anything during a chapter 13, but I maxed mine out, and nothing happened (about 2 years into this). This was before I asked. But, now that I know, I am contributing zero.

However, I think its better to NOT put anything in there until after discharge, because: a. its not worth pissing off the trustee
b. the 401k is vastly over-rated for many reasons (stuff happens from now until you hit 59.5, where you may need that money, the manipulation of the stock market, you have no idea what you will pay in taxes when you retire, and the worst is that your are tying up your money, and putting it in the hands of Wall Street crooks).

Good luck.

[tammygirl1]

I had stopped contributing early last year due to needing the cash weekly. Our lawyer said we were allowed to contribute so I started contributing 5% (same amount I had previously contributed) a couple months before we filed and also was allowed to pay back a 401k loan at same time. I think it depends on district and trustee...

[justbroke]

I was able to contribute 6% which is the auto-match (at 100%) for my company (in addition to some other company "auto-contributions").

By law, the Trustee is not allowed to complain about 401(k) contributions, so long as you are not also trying to re-pay a 401(k) loan. It is clearly in the 2005 amendments to the bankruptcy code that money used for 401(k) contributions is "not disposable income". If you have an attorney that doesn't fight this, then you need to find another attorney. You absolutely need to be able to save in a Chapter 13. The 401(k) contribution is a great way to save. (You also need to save through your Plan for "non-extreme" emergencies. For example, needing new tires is not an extreme emergency. Repairing a hole in the roof of your home, may be an extreme emergency.)

[jange]

I am paying back my 401K loan, I wasn't able to afford paying the loan and contributing. After filing and getting expenses under control I have started putting 2% in (company match is 4%). When my loan is done, I plan on upping to equal the amount of what I was paying on the loan, should be about 9%-10%.

[catleg]

Why do you say that JB? Both loan repayments and contributions are explicitly not "property of the estate". It's allowed in these parts.

[MOMof3]

I contribute 8% total, 4.5% is matched. My hubby contributes 4% w/4% match. We also took out a 401k loan in year 2 which is almost paid back & our lawyer said that was fine as well. I think it probably just depends on your area courts & trustee.

[justbroke]

Why do you say that JB? Both loan repayments and contributions are explicitly not "property of the estate". It's allowed in these parts.

The super-majority of courts have found that contributions or repayments are allowed. This is a "good faith" issue. If the Courts allowed you to have both a repayment and contribution, what would keep debtors from just borrowing a large amount from their 401(k) just before filing, while keeping contributions and keeping both?

Again, the problem is a good faith question. Some Trustees won't fight you over them, but most will; especially in a Chapter 13 where you are paying less than 70% to the unsecured creditors.

[Flamingo]

What most run into is that money is so tight, they just cannot afford to save in a 401(k) during a Chapter 13. The priority is trying to save money during a Chapter 13 to cover the possibility of major issues (i.e., expensive car repairs, new tires, leaking roof, hot water heater blowing, etc. It may be difficult to contribute to a 401(k) and also save on the side. The best thing to do is to speak with one's attorney as to what can be done as to your specific situation. In our situation with a job loss and 70% loss of income, I had to stop 401(k) contributions after my husband's job loss and could not afford to start them again until about two years into our Plan - I started contributing at 1% with my attorney's permission and advice that if contributing that percentage interfered with making Plan payments on time, he said the contributions would have to stop.

[IamOld]

I really NEED to at least put in 5% so I can get co match of 7%...I've got NOTHING else...I do have a loan, but it's only $10/pay - would anyone object over $10/pay for a 401k loan??

[catleg]

Not for $10. Maybe $20 though. You'd better rein in that out of control spending :-)

[IamOld]

ROFL!!!!!!! By all means I shall!!!!!!! It went to pay atty :-)

And probably to pay my PACER bill :-)

[LadyInTheRed]

My plan includes both a 401k loan payment and contribution. But, the total of the two was less than 5% of my income at the time I filed. I've was able to increase the contribution a little bit when I got a raise that wasn't high enough to have to report to the trustee.

IamOld, if you can afford it, I suggest you ask your attorney about trying to go for the 7% that your employer will match. If the trustee objects, you can agree to a lower amount.

[Flamingo]

I really NEED to at least put in 5% so I can get co match of 7%...I've got NOTHING else...I do have a loan, but it's only $10/pay - would anyone object over $10/pay for a 401k loan??

Remember, what you "need" and want what you can actually do are two different things when it comes to BK. Your financial house no longer belongs to you in a Chapter 13 but by the Trustee. In a situation such as this, guessing does not work and your attorney will advise you what will work. I also had a loan and that will be included in your plan and taken out of your paycheck as usual. The issue will be how much you can or can't save into your 401(k).

[IamOld]

Remember, what you "need" and want what you can actually do are two different things when it comes to BK. Your financial house no longer belongs to you in a Chapter 13 but by the Trustee. In a situation such as this, guessing does not work and your attorney will advise you what will work. I also had a loan and that will be included in your plan and taken out of your paycheck as usual. The issue will be how much you can or can't save into your 401(k).

THANKS!!!!

That's what we have now...waiting for other shoes to drop...