401k Non Mandatory - will Trustee stop it?

[RLOPE]

If contributions to my 401k are not mandatory by the company I work for, will the trustee put a stop to contributions?

I currently pay $700 into it per month. Company matches up to 6% of salary.

[LadyInTheRed]

It depends on the trustee and your overall plan. Your attorney should have an idea of what your trustee allows. The general consensus seems to be that a contribution equal to the maximum employer match will be allowed. My plan included a 401k contribution (no employer match) and 401k loan payment totalling about 5% of my income and neither was questioned.

Remember, the trustee doesn't have the power to put a stop to your contributions. He/she may object to confirmation of your plan based on a contribution included as an expenses on Schedule J. If (s)he does, your attorney should try to negotiate a compromise with the trustee, perhaps for a lower contribution. If no agreement is reached, the judge would make the final determination of whether your plan should be confirmed.

[despritfreya]

If contributions to my 401k are not mandatory by the company I work for, will the trustee put a stop to contributions?

Your ability to continue to contribute to a 401k on a voluntary basis will be decided by the 9th Circuit Bankruptcy Appellate Panel within the next 3 to 6 months. As it stands right now, LadyInTheRed is correct. It depends upon the Trustee. Once the BAP decides it will not be up to the Trustee, the creditor or the debtor. Either it will be allowed or it won't be.

Des.

[justbroke]

If contributions to my 401k are not mandatory by the company I work for, will the trustee put a stop to contributions?

Unless the contribution is above the maximum point where your employer mnatches, or in excess of 10%, the Trustee won't say anything. Additionally, 401(k) and saving for retirement is ENCOURAGED by the Bankruptcy Code and is explicitly "not disposable income" for determining what you pay in your plan. The only excuse a Trustee could come up with, is that you filed in "bad faith". That's a tough burden if the loan repayment(s) and/or contributions don't exceed the employer match or the highest allowed by law (before you can't contribute pre-tax income).

[IamOld]

Your ability to continue to contribute to a 401k on a voluntary basis will be decided by the 9th Circuit Bankruptcy Appellate Panel within the next 3 to 6 months. As it stands right now, LadyInTheRed is correct. It depends upon the Trustee. Once the BAP decides it will not be up to the Trustee, the creditor or the debtor. Either it will be allowed or it won't be.

Des.

For what it's worth, I think if they look at the greater public policy "good," they need to allow 401k/403b etc contribs.

Also, I wonder if this will apply outside of the 9th Circuit? Do you think other BK courts will look to this for guidance?

[despritfreya]

Also, I wonder if this will apply outside of the 9th Circuit? Do you think other BK courts will look to this for guidance?

Apparently there is a split in authority. The only reason I know about the BAP case is that I was dealing with this issue with a creditor and was trying to get the creditor to agree to litigate it up the chain. In searching for something for this forum I came across a Montana case that has just been appealed to the BAP. Someone beat me to the punch.

Des.

[justbroke]

I hope that it gets settled in the 9th Circuit. It's too bad that it's still so undetermined in that appellate circuit. In any event, the BAP isn't so binding across the appeals circuit, right... so that would only help Montana?

[despritfreya]

I hope that it gets settled in the 9th Circuit. It's too bad that it's still so undetermined in that appellate circuit. In any event, the BAP isn't so binding across the appeals circuit, right... so that would only help Montana?

Whatever the 9th Cir BAP decides (I am going to assume it will be a published opinion) its decision will be binding on all bk court's within the 9th Cir (AK, AZ, CA, HI, ID, MT, NV, OR, WA and Guam). This will last if and until the 9th Circuit Court of Appeals hears the issue. If it is not a published opinion it will not have precedential value but may have persuasive value.


Des.

[justbroke]

Okay Des, I'm persuaded!

[despritfreya]

Okay Des, I'm persuaded!

Well, actually you have now raised an issue I cannot answer and have sent the following e mail to my boss.

Boss,

We know that a published 9th Cir BAP ruling is binding on all bankruptcy courts within the 9th Circuit until the Court of Appeals rules differently. What about a published District Court ruling? Is an appellate decision coming out of the District Court sitting in AZ binding upon a bankruptcy court sitting in California? What happens if the District Court in California decides differently from the District Court in Arizona? Which one controls and where?

Des

I will let you know what the answer is. . .

Des.

[LadyInTheRed]

Additionally, 401(k) and saving for retirement is ENCOURAGED by the Bankruptcy Code and is explicitly "not disposable income" for determining what you pay in your plan.

I think you are referring to Section 1322(f) which applies to repayment of 401k loans, not contributions. Unfortunately, I don't think the code is so clear about 401k contributions.

[LadyInTheRed]

Well, actually you have now raised an issue I cannot answer and have sent the following e mail to my boss.

Boss,

We know that a published 9th Cir BAP ruling is binding on all bankruptcy courts within the 9th Circuit until the Court of Appeals rules differently. What about a published District Court ruling? Is an appellate decision coming out of the District Court sitting in AZ binding upon a bankruptcy court sitting in California? What happens if the District Court in California decides differently from the District Court in Arizona? Which one controls and where?

Des

I will let you know what the answer is. . .

Des.

I am pretty sure that a ruling in a Nevada Districut Court is not binding on a California District Court, but is merely pursuasive. It's up to the Court of Appeals to resolve any conflict between districts.

Do I get a prize if the boss agrees?

[despritfreya]

Do I get a prize if the boss agrees?

Yup assuming the boss actually answers me.

Des.

[justbroke]

I think you are referring to Section 1322(f) which applies to repayment of 401k loans, not contributions. Unfortunately, I don't think the code is so clear about 401k contributions.

Actually, I'm talking about 11 USC 541(b)(7)(A)...

11 USC 541(b) Property of the estate does not include --

(7) any amount--
(A) withheld by an employer from the wages of employees for payment as contributions

This is why I think that this is well settled in the 11th Circuit (Florida, Georgia, Alabama). I would hope that the other Districts could actually read the text of what constitutes property of the Estate in 11 USC 541... and not embellish. But, alas, that's what makes practicing bankruptcy law so much fun for Des.

[despritfreya]

Do I get a prize if the boss agrees?

Well, gues you do get the prize. Here's the response from "the boss".

"I believe District-Az is binding in Az. and can be used in Cal for support but not if Cal. District is in opposition. Only my opinion."

Des.