Had 341 meeting in District 9 today .....info re. retirement contributions

[sophieanne]

HI everyone,

First of all thank you to everyone for taking part on this site. It helped me prepare mentally for today's meeting...i think the one thing i've learned is that every case is unique...so don't stress it. (which was hard for me since i'm over detail oriented). The other thing is bring your ID and proof of SSN with you. 4 people (all with the same attorney) diid not have the SSN so there 341 is being continued. The trustee was not happy with that attorney let me tell you. A very important detail to remember.

Anyhow the meeting went very well. We are in a 100% plan (major unsecured debt) and a car loan that will be paid//completed during the 60 month period.

The questions were all routine... but there was one additional question asked to everyone. Do you make voluntary contributions to a retirement plan. I know this has been discussed in this forum in the last month.

Anyhow, everyone was told that due to a recent ruling in District 9, if you are not in a 100% plan, you may not have voluntary retirement contributions as one of your expenses (or deducted from your pay). District 9 has decided to follow a recent ruling that these contributions should be available to pay creditors back (again only if you are not in a 100% plan). If you have a retirement loan you are paying back, you can complete that, however, once it is repaid, the money then has to go to creditors.

Just wanted to share that with everyone. It shocked a few people this morning.

Other than that, our meeting went well and it was over in 5 minutes. No concerns, no problems.

Now I'm going to go sleep for a couple hours

[ValleYum]

Congrats sophieanne! I know you must be relieved!!

[despritfreya]

.everyone was told that due to a recent ruling. . . if you are not in a 100% plan, you may not have voluntary retirement contributions as one of your expenses (or deducted from your pay). . . It shocked a few people this morning.

I trust those who were "shocked" were not represented by counsel. When the Parks decision came out on 8/6/12, I immediately notified any client that will be impacted by it. That is my responsibility in representing debtors. I would assume other attnys did the same.

Des.

[flowerchild]

No 401K contributions anymore? Wow....that is a big blow especially for those whose employers do a match. I will consider myself lucky because I continued to contribute through my entire plan although I did reduce it to the minimum required for employer match. It's like you're getting a double whammy there being denied future earning potential on that money and being bankrupt. But of course the courts would probably say that you have no business contributing anyway if you need to file bankruptcy due to extensive debt overload. Oh well, I guess this will be one of the controversial subjects that some will say you're trying to have your cake and eat it too.

[sophieanne]

Hi Des..
Actually at least two of them had counsel.

One of the attorneys was saying their client had been doing this so long they hoped it wouldn't change. Well it's going to change per the trustee.

[pamkev]

I have a question is this only if your filed a Chapter 13?

[despritfreya]

I have a question is this only if your filed a Chapter 13?

1. The Parks decision is from the 9th Circuit. It has no direct impact in your State.

2. The Parks decision dealt with one’s ability to pay creditors through a Chapter 13 Plan. A voluntary contribution is not a necessary monthly expense therefore, a debtor who is above median income, cannot divert $ to a voluntary retirement plan at the expense of creditors. However, it appears the ruling has no impact on those who were below median income filers. Only time will tell if my reading is correct.

3. The Parks decision applies in a 13 however, since 401k contributions are not an allowed expense for means testing purposes, the deduction probably should not be utilized in a Chapter 7 anyway.

Actually at least two of them had counsel. One of the attorneys was saying their client had been doing this so long they hoped it wouldn't change. Well it's going to change per the trustee.

As to those attnys who got caught with their pants down, they will just have to explain what happened to their clients. Nothing they could do to change the out come of the Bankruptcy Appellate Panel decision.

Des.

[LadyInTheRed]

1. The Parks decision is from the 9th Circuit. It has no direct impact in your State.

Just to clariffy, the OP's reference to the 9th District is an error. The 9th Circuit where the Park decision applies covers the states of Alaska, Hawaii, Washington, Idao, Montana, Nevada, Arizona and California. The circuit is then broken down into several districts along state lines. California is broken down into 4 districts and Washington into 2 Districts. The other states each have only one district. Districts are then broken down into divisions.

[tobee43]

I trust those who were "shocked" were not represented by counsel. When the Parks decision came out on 8/6/12, I immediately notified any client that will be impacted by it. That is my responsibility in representing debtors. I would assume other attnys did the same.

Des.

of course you would des, that's because i know it's beyond your scope of belief, but you are one in many million out there in the world of atty's.

[pamkev]

Thanks

[sophieanne]

I'm sorry if I posted something incorectly. I'm still confused over district and circuit,etc.

The words used by the trustee were 9th District., not circuit.

[NeedOptions]

I assume that they cannot retroactively go back and change the ruling on a Ch. 13 that has already been confirmed? I am in a 0% payback plan (paying autos and trustee fee in the plan) and contribute $1,000/month ($500 each for myself and my wife) to a 403b (similar to 401k but for educators).

[sophieanne]

HI Needoptions: Not to worry, it's only going forward......

[despritfreya]

I assume that they cannot retroactively go back and change the ruling on a Ch. 13 that has already been confirmed? I am in a 0% payback plan (paying autos and trustee fee in the plan) and contribute $1,000/month ($500 each for myself and my wife) to a 403b (similar to 401k but for educators).

1. It appears that you are a teacher. If so, maybe you work for the state or local government. If so, your contribution may be mandatory for employment. In my state, governmental employees must contribute and the only factor to be considered should be that they will only be allowed to contribute the minimum required.

2. If you have a Confirmed Plan, while someone could seek a Plan modification under 11 USC 1329, it is highly unlikely that such will happen. However, if you ever have to ask for a modification I could see the issue popping up. I have a client who was hoping to modify early next year to lower payments. My advice after Parks was to not rock the boat.

Des.

[LadyInTheRed]

I'm sorry if I posted something incorectly. I'm still confused over district and circuit,etc.

The words used by the trustee were 9th District., not circuit.

No need to apologize Sounds like the trustee misspoke. I just want to make sure people understand who this does and does not affect. Somebody trying to figure out if they are in the 9th district could get confused.