The 9th Circuit Bankruptcy Appellate Panel ruled yesterday that above median income filers cannot deduct voluntary contributions to a retirement plan when determining what their available disposable income is. This ruling brings my jurisdiction back to the way it was before BAPCPA - where the only retirement plan deductions that were allowed were those that were mandatory for employment. I my state the only mandatory ones cover government employees.
In re Parks (8/6/12 - 9th Cir. BAP - Ordered Published - BAP No. MT-11-1366-JuMkH)
In addition to the 401k contribution issue, this ruling seems to put the kibosh on our Trustees using actual living expenses that debtors have on a monthly basis (the reality approach they have always used). Instead, we now have an appellate ruling that states above median filers can only use the expenses allowed in means testing. While this part of the ruling is dicta (not necessary for the outcome of the case) I have to wonder if our district's trustees will feel obligated to require debtors to ignore their true expenses and only use the means test formula. That will truly suck big time.
Des.
In re Parks (8/6/12 - 9th Cir. BAP - Ordered Published - BAP No. MT-11-1366-JuMkH)
Simply put, without a clearer direction comparable to the carve out from disposable income for the repayment of retirement loans in § 1322(f), it seems unlikely that Congress intended § 541(b)(7)(A) to bestow a benefit on above-median chapter 13 debtors while their creditors absorbed an even greater loss. . .
Section 1325(b)(2)(A)(I) states that “disposable income means current monthly income received by the debtor . . . less amounts reasonably necessary to be expended . . . for the maintenance or support of the debtor . . . .” Here, because debtors’ income exceeded the state median, the “amounts reasonably needed to be expended” are determined by the “means test” set forth in § 707(b)(2). . . Voluntary contributions to 401(k) retirement plans are not mentioned as “reasonable and necessary expenses” under the “means test”. . .
For all these reasons, we hold that § 541(b)(7) does not authorize chapter 13 debtors to exclude voluntary postpetition retirement contributions in any amount for purposes of calculating their disposable income
Section 1325(b)(2)(A)(I) states that “disposable income means current monthly income received by the debtor . . . less amounts reasonably necessary to be expended . . . for the maintenance or support of the debtor . . . .” Here, because debtors’ income exceeded the state median, the “amounts reasonably needed to be expended” are determined by the “means test” set forth in § 707(b)(2). . . Voluntary contributions to 401(k) retirement plans are not mentioned as “reasonable and necessary expenses” under the “means test”. . .
For all these reasons, we hold that § 541(b)(7) does not authorize chapter 13 debtors to exclude voluntary postpetition retirement contributions in any amount for purposes of calculating their disposable income
In addition to the 401k contribution issue, this ruling seems to put the kibosh on our Trustees using actual living expenses that debtors have on a monthly basis (the reality approach they have always used). Instead, we now have an appellate ruling that states above median filers can only use the expenses allowed in means testing. While this part of the ruling is dicta (not necessary for the outcome of the case) I have to wonder if our district's trustees will feel obligated to require debtors to ignore their true expenses and only use the means test formula. That will truly suck big time.
Des.
Woo-hoo!
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