401K Contribution

[poormama]

I have left a message for my lawyer and she hasn't gotten back. I have actually emailed and left a message. Anyways, when I met with the lawyer a couple of weeks ago we fit for Chapt 7 with our expenses and such. But I forgot my husband gives into his 401K, it's only 5% (~$189/check - 2x a month). Should we stop giving into that now until after the bankruptcy, I don't want to screw up the income part of the paperwork. I have figured the we'd only get about $275 extra in a check after taxes, if that.

We're paying the attorney off on the 18th, just need to make sure the 341 meeting isn't during a class field trip that I have.

[Flamingo]

You need to provide that information to your attorney.

[poormama]

I have been trying to. I just called again, been 2 days since I left a message and 1 1/2 weeks since I sent an email with the question. The only response I got was a very rude receptionist telling me the attorney is very busy. I understand she is busy and I'm not trying to bother her but now I am getting concerned. I'll be dropping off $600 on Monday and then the remaining $600 on the 18th. Should I start looking for a lawyer who might be able to answer my questions?

When my mom died we had to get an estate lawyer who charged a lot of money and never even bothered to meet with us. We used all of our life insurance money paying off my mom's debt. Come to find out, we didn't have to use any of it to pay her debt off. She was single and no spouse to pay back debt. Now the secretary asked me if she had debt and I had said that I thought we had to pay it back somehow. She didn't respond. I'm concerned that this bankruptcy lawyer might be the same way now. Ugh! I called to see if I could set up a review meeting with her next week, hubby couldn't go to original meeting. I was told that the other admin can go over the paperwork. But when I met with her originally, she said we could set up appts any time and such. Again, I realize we are not her only clients but there are questions we have that I forgot to ask in the first meeting. We have put a retainer down. I am at a loss at this point.

[SMinGA]

If you don't feel you are getting attention - then seek another atty.

In general though, if you've been making this contribution and its not a very high amount (don't think most districts would consider 5% high) then it should not be an issue. Its a way to put yourself on solid financial ground down the road. Your attorney should be aware of this deduction though, assuming you have given check stubs and such...

[justbroke]

If you are under the median, it is likely to be overlooked by the United States Trustee (UST). However, if you are over the median, your case is highly likely to be scrutinized. In that case, they will probably not allow you to claim the 401(k) contribution and will adjust your income/expenses.

[poormama]

She called back and said to either stop contributing or change it to no more than $50/month. With this and the u/e getting reinstated, we're close to not being able to file Chapt 7. Without u/e, we're fine. Ugh . . . I have been bugging my husband to file for about a year now, wish we would've filed earlier. His raise is coming up and it's usually 7-10%.

We are above the median but with our expenses, not including cc debt, we're a negative every month.

[olivies]

She called back and said to either stop contributing or change it to no more than $50/month.

We are above median, and contribute about $100 a paycheck (biweekly) to the 401K. Our attorney asked us if it was a mandatory contribution or voluntary. Ours is voluntary, so we did not include it.

[ssmdem]

We will be below median - but since we are surrendering the house so consequently not paying the mortgage anymore, we have the funds to contribute to the 401K. Factoring in the IRS allowable amount for rent, we are ALMOST negative with all of our expenses. The 401K definitely makes us a negative. Can the trustee say anything about us still contributing to it if we're not even using it as an expense?

[SMinGA]

Its probably more of a district/trustee specific topic than one that is handled the same in all areas.

My atty has said its generally not a problem, as long as the amount is not extreme. He recommends stopping at the point that the employer's contribution is maxed out. I have a part time job for which I am not yet eligible for the 401k - but will be in the next few months. (Must reach 1,000 hrs, have put in about 750 so far.) I asked our atty about this, as we were expecting to file by the end of 2010 shortly after becoming eligible. Atty said I could contribute 5% to reach max employer match. Would only amount to $50-60 a month however.

[ssmdem]

Yeh, ours is only 5% - has been for 10+ years now. We changed it to 15% briefly a few months ago to catch up for a few months that they weren't taking any out (another story) but it's back to 5% now.


I've got our new budget set up and we start strictly living by it August 1. We didn't do too bad in July (trial run to see if I had my numbers right) -- went over on food about $100 - but I can easily adjust that.

Hoping since I'll have four total months of documented expenses, receipts, and bank account history that the trustee shouldn't object to any of the expenses -- only medical goes over the IRS allowable.

[SMinGA]

Congrats! For a first month, I would say being over by $100 is not bad. Works out to about $23/week and now you have a better idea of what you're actually spending.

We're adjusting to a new budgeting 'schedule' ourselves, due to some slight changes we have made. Changes that are good for our family... Its not like we have all the $ for a month at the beginning of the month - so its a matter of budgeting what is due in (and when) and when it will need to go out again and making sure it all lines up right.

I've got our new budget set up and we start strictly living by it August 1. We didn't do too bad in July (trial run to see if I had my numbers right) -- went over on food about $100 - but I can easily adjust that.

[justbroke]

My atty has said its generally not a problem, as long as the amount is not extreme. He recommends stopping at the point that the employer's contribution is maxed out.

For a Chapter 13, this is the case and caselaw pretty much confirms that contributions to a 401(k), while in a Chapter 13, are not part of your disposable monthly income.

However, this is the Chapter 7 forum area. Contributions to a 401(k) or other ERISA plan are only allowable if it's mandatory or you have special circumstances (very close to retirement with no retirement account or employer-sponsored pension plan).

[SMinGA]

Good point Justbroke... Too easy to forget that certain things (401k being a main one) are handled differently in 7 vs. 13.

[ssmdem]

For a Chapter 13, this is the case and caselaw pretty much confirms that contributions to a 401(k), while in a Chapter 13, are not part of your disposable monthly income.

However, this is the Chapter 7 forum area. Contributions to a 401(k) or other ERISA plan are only allowable if it's mandatory or you have special circumstances (very close to retirement with no retirement account or employer-sponsored pension plan).

Do you suggest me discontinuing the deduction until after filing? We are NOT using it as an expense -- we are close to negative, if not negative, without even taking it into account. The only reason we are able to continue the deduction right now is because we are living rent-free at the moment.

[justbroke]

Do you suggest me discontinuing the deduction until after filing?

No. The issue is only with claiming it. Not actually paying contributions. I especially encourage contributions where your employer matches!!! It's free money.