One more question - -regarding 401K contributions...

[goblue]

I'm putting together some rough numbers on the Schedule I and Schedule J forms. Do I list my 401K deductions on those forms (specifically Schedule I since this reduces my income)? I have 8% taken out, 4% is 100% matched by my employer. I've been enrolled in 401K for over 5 years and increased my contribution to 8% in March 2008. (Not sure if it matters but I'm in a ROTH 401K so my contributions are taken out after taxes)

I've searched the board and I can't seem to find a definitive answer. I'm in Illinois.

Thanks so much.

[Strapped4Csh]

I'm not overly experienced on this, but I did ask the attorney that I met with this yesterday. I'm contributing about the same (6%), with my employer putting in 3%, and have been for about 7 years. I was told it wasn't an issue.

I suspect that if you made a substantial increase (say to 50%) shortly before you file, that could cause some question, but I suspect that you are probably OK.

[Allmixedup]

Funny..my lawyer told me to stop giving to it. I haven't contributed to my 401k in 3 months! She was saying something about not looking good to be saving right now! I thought is was weird but I didn'd question it further. I just want to hurry and file and be done with already! I think by Sept. we will file and then I will start to contribute again!

[Strapped4Csh]

Yeah, well that's what I would have thought, and that's why I asked. We're thinking the end of Aug or early September as well... Have you started getting paperwork together yet? I can't believe the amount of information they want... Makes me wish I saved all those CC statements I've been ignoring!

[justbroke]

For Chapter 7 cases, 401(k) loan repayments and contributions are not allowed expenses in the calculation of disposable income. (11 USC 707(b)).

That's why, if you're filing a Chapter 7 case, many lawyers will tell you that it doesn't help you. Now, for a Chapter 13, the contributions are not disposable income and are allowed expenses. So are the loan repayments in a Chapter 13.

[Allmixedup]

Strapped4cash,
yes I have been putting paperwork together since April! We are surrendering our house and just got the money together for a rental. So now that is over we are going to finally be paying off the lawyer and filing! I agree it is alot of paperwork..worse than signing for a mortgage!!

And to Justbroke..I understand that it's not an allowed expense..I just didn't want my paycheck to go up after I halted the contributions!

[justbroke]

And to Justbroke..I understand that it's not an allowed expense..I just didn't want my paycheck to go up after I halted the contributions!

It wouldn't matter if your pay check went "up" after halting them. First, the Bankruptcy Schedules use "gross" income before even Federal Taxes are deducted. Second, it would still be part of your disposable income.

Now, if you are getting a good match at your company (50% of the first 3-6% or better), then it's better to just keep contributing in the long run. it's "free" money, and I don't think any lawyer will tell you to give up free money. We get 100% of the first 6%... so it's hundreds of dollars a month for me in "free" money, so it's a no brainer to max out my contributions. (Also, caveat that with I'm in a Chapter 13, so it serves a different purpose. However, I wouldn't stop getting "free" money just because a lawyer says that it doesn't look good. I would ask the attorney... so don't take the "free" money? See, I'm vested at my company, so it's my money immediately. If you're been at the employer for less than 5 years, it may not be 100% vested, so...)

[signal]

For Chapter 7 cases, 401(k) loan repayments and contributions are not allowed expenses in the calculation of disposable income. (11 USC 707(b)).

That's why, if you're filing a Chapter 7 case, many lawyers will tell you that it doesn't help you. Now, for a Chapter 13, the contributions are not disposable income and are allowed expenses. So are the loan repayments in a Chapter 13.

I would say it even hurts you. Income is income (gross) whether it goes into 401k or goes into your pocket. At least if you have it go into your pocket, it will get taxed, and taxes ARE exempt, so in a ch7, I would think lowering your 401k would 1) not be a red flag, as this gives you more available cash in a very tough time, 2) would afford you the benefit of having less disposable income as far as the way that income is calculated on the means test.