The dreaded UST's Statement of Presumed Abuse

[woeisme]

My CH 13 trustee allows contributions up to the employers max matching amount, or what the employer requires as a condition of employment, but nothing "extra". So in my case, my employer matches the first 5%, and requires 5% after the first year of employment (during the first year they don't match and so don't require any contributions), so it is the same amount, and I can't put in any beyond 5% according to my trustee. So if I tried to put in 10%, he'd veto that, but the 5% is fine since it's a condition of employment. Or if my employer matched some higher amount, like 7%, I could do that even if I wasn't required to put in so much, because the trustee doesn't want to put filers in a position where they lose employer matches. But I can't put in up to the IRS max contribution (which in my case would be nearly 25% of my salary) because he'd see that as hiding wages from the creditors.

[needafreshstart]

I may be cynical of lawyers, but he may not have said anything knowing it would get pushed to a chapter 13. Lawyers make more in chapter 13 cases. Personally speaking if I had $1200 a month to put into 401k, I wouldn't have been filing bankruptcy.

[HHM]

I may be cynical of lawyers, but he may not have said anything knowing it would get pushed to a chapter 13. Lawyers make more in chapter 13 cases. Personally speaking if I had $1200 a month to put into 401k, I wouldn't have been filing bankruptcy.

I hate to say, but that is kind-of a good point.

[diviaruba]

My CH 13 trustee allows contributions up to the employers max matching amount, or what the employer requires as a condition of employment, but nothing "extra". So in my case, my employer matches the first 5%, and requires 5% after the first year of employment (during the first year they don't match and so don't require any contributions), so it is the same amount, and I can't put in any beyond 5% according to my trustee. So if I tried to put in 10%, he'd veto that, but the 5% is fine since it's a condition of employment. Or if my employer matched some higher amount, like 7%, I could do that even if I wasn't required to put in so much, because the trustee doesn't want to put filers in a position where they lose employer matches. But I can't put in up to the IRS max contribution (which in my case would be nearly 25% of my salary) because he'd see that as hiding wages from the creditors.

Well, under Chapter 7, it is a whole different kettle of fish. Unlike line 55 on the B22C (for Ch. 13 filers), which specifically cites the authority of 551(b)(7) for retirement contributions and 362(b)(19) for repayment of retirement plan loans, there is no equivalent on the B22A for Ch 7 filers.

Time and again in the cases which address this, Congressional intent has been raised as an issue, to wit, if Congress specifically authorizes something in one part of the statute, but fails to include it in another, then the intent of Congress was to specifically exclude it. With very few exceptions in the courts, 401K contributions have not been allowed on the Means Test for Ch 7 filers. Beyond the statutory considerations, there is a sentiment of "those who can pay, should pay" and "you should not be paying yourself at the expense of your creditors".

[getouttadebt]

Update: I met with my attorney on Friday. He said, "We have no idea at this point why the UST is filing the Statement of Presumed Abuse. I filed your paperwork, and in my opinion, you do pass the means test with no disposable income." Further, he added, "Just try to chill out until we know more from the UST. Just know that the worst possible thing that can happen is conversion to Ch. 13 and some sort of payment plan." He said the UST might file a motion within 30 days stipulating Change of Statement of Presumed Abuse, but that there is nothing we can do until the UST makes his next move.

Do you agree?...or is my attorney being too shady with this explanation?

Thanks,
getouttadebt

[diviaruba]

Did you ask him if he thought it had anything to do with your 401(k) contributions?

[PaKettle]

Yeah, I know the 401k money is protected, but my question was more like this -- can the UST look at ongoing deductions as money he could claim for the creditors? Since participation in my 401k is "voluntary" -- could they force me to withdraw from the plan and then show money left over to force me into Ch 13? I am quite sure they can't touch the funds already sitting in the 401k plan, but a portion of my payroll goes direct to 401k each pay period.

Anyone have any other input on this?

Thanks,
getouttadebt

Do a search on "401k" here and see if you can find the info.
I THINK I remember reading here about how putting too much into your 401k can be a problem, that it would be considered disposable income available to your creditors.

I hope I'm wrong, but my guess is that this is the problem, along with your being over the median, or maybe having expenses that are too high...

Good luck though, I hope you can get the Ch. 7 through!

If not, is there any way you can legitmately increase your expenses or lower your income in the future, to convert back to a 7?