Increase 401k contributions to offset potential added income

[RLOPE]

I am currently in a Chapter 13, and I have a 401k loan that in March of 2013 I will pay off. The current repayment is $700 per month. In March 2013, can I increase my monthly contributions to my 401k by $700 to ward off those funds being distributed to my creditors?

[lrprn]

This is a question you will need to ask your own attorney who is familiar with what the trustee and local court have allowed for retirement contributions before now.

Some local courts cap the amount you can contribute to a 401K during an active 13 case. For example, our trustee allowed up to 5% of total income for each of us to be contributed to retirement, no more. However, other trustees aren't nearly as strict, and yet others scrutize retirement contributions very closely keeping them to the bare minimum % they can get away with.

What % of your total income do you contribute to your retirement now? If you add $700 more a month, how much does that increase the %?

[AngelinaCatHub]

I agree with LRPRN as the Trustee does not work for you, but the creditors. It would look like just what it is, shielding an asset. I think it is wise to do so as you have no malicious intent but keep it out in the open. Worse case is perhaps your 13 would be paid out sooner. 'Hub

[HHM]

I am currently in a Chapter 13, and I have a 401k loan that in March of 2013 I will pay off. The current repayment is $700 per month. In March 2013, can I increase my monthly contributions to my 401k by $700 to ward off those funds being distributed to my creditors?

Very unlikely the trustee will let that happen, especially in that amount. I can practically guarantee that the trustee will object to the plan and want you to step up the payment when the 401K loan is paid off...that is pretty much right out of the chapter 13 trustee handbook and guidance from the US Trustee.

[RLOPE]

Angelina - help me understand this. So, the extra money to the chapter 13 payment would pay it off sooner?

[chicagoed195]

What does your plan say about the payoff? My plan requires me to increase my payment by the amount of the 401 (k) loan amount at the time it is paid off and my employer was instructed to increase the withholding for the Chapter 13 payment at the time the loan was paid off. I am not in a 100% plan.

[AZNoName]

Does your employer match your contributions? my atty advised me that could make a difference.