Are 401K contributions....

[SinkingFast]

We're filing in Indiana.

Hubby's company is set up that you can start contributing the start of the New Quarter after 1 year of employment. He started with them end of January, 05, so April 1, 06 was when he could start to contribute to the plan.

We met with the attny on March 30, and specifically asked him about contributing to the 401K because Hubby had just received the paperwork.

Attny said it was OK and would actually even help. He never said we couldn't contribute.

It's no big deal. If the Court says No, Hubby just goes back in, fills out a paper, and they quit withdrawing the next pay period.

But still, I wish there was a consensus about this. Hubby's company doesn't offer any other form of retirement. And we didn't go 20% or anything like that. The contribution level was only 2 or 3%. Just enough that the net paycheck will be pretty close to the same.

[aa06a47]

I believe it will all depend on if your in a chapter 7 bk or a chapter 13bk. If your chapter 7, you will be fine after a reasonable waiting period (someone recommended 6 months) to start contributing. It's your money by the way. If your in a chapter 13, it is that "all" your disposable income thing again. But I have heard it actually depends on what state your in. Some trustees allow it and encourage it, some say poo on you, pay me.

[Jessika1012]

Let's get this straight.....

On the means test.........you cannot claim your 401k contributions and Employee Stock Purchase plans....but you CAN include your 401K repayment loans.

Then, when you have passed the means test and are assumed to file chapter 7, you will go to schedule I. It asks here for your currently monthly gross along with payroll taxes, social security, insurance, union dues and OTHER. The other can include loan repayments. What if in the last six months that they are taking your income from you had 401K contributions made that were taken out of your check? Is this allowed to be put on here since your net was definitely lower? It just doesn't seem right for that to be left out if you already had paid it?

I have not found a clear cut answer. Some people are saying that this is better to have the contributions, some are saying it's not. Does anyone have a solid answer for this one? I am lost....

[FoolAndHisMoney]

On the means test.........you cannot claim your 401k contributions and Employee Stock Purchase plans....but you CAN include your 401K repayment loans.

Then, when you have passed the means test and are assumed to file chapter 7, you will go to schedule I. It asks here for your currently monthly gross along with payroll taxes, social security, insurance, union dues and OTHER. The other can include loan repayments. What if in the last six months that they are taking your income from you had 401K contributions made that were taken out of your check? Is this allowed to be put on here since your net was definitely lower? It just doesn't seem right for that to be left out if you already had paid it?

I have not found a clear cut answer. Some people are saying that this is better to have the contributions, some are saying it's not. Does anyone have a solid answer for this one? I am lost....

I guess every lawyer has their own opinion on this. It seems the courts do too. While in any kind of bankruptcy you are NOT allowed to contribute to any retirement savings unless it's mandatory such as a pension required by your contract. Your expenses can only be for the reasonable support of the debtor and dependents and nothing more.

Regarding the 6 months prior, most of what I have heard from this forum and other sources is that if you have been contributing the 6 months prior to filing, unless it's very small amounts the trustee feels that you could have used this money to pay creditors instead, so they may ask you to give it back to them in payments since you didn't have the creditors best interest in mind.

If you have saved any 401k money when calculating the means test this will count towards your income and not an allowed deduction.

[aa06a47]

In a Chapter 7, I wouldn't wait 6 months to start contributing if you have the expendable money to do so. I would as one poster stated, get an emergency fund set up first. You'll be less likely to fall into the credit card debt if you have a cash reserve.

In a Chapter 13, I have read where some trustees encourage contributions, some say no way, pay me. My attorney actaully put in my "expenses" a small 401K contribution. (2% of my wages). She said since I was doing that before bankruptcy. She has done several hundred bankruptcy cases in the last 3 years, so I figure the trustee must think it is OK, otherwise she wouldn't have put it down. I hope so, I'm starting to get grey hair and don't want to be completely broke if I make it to retirement.

[Jessika1012]

......

I am most concerned about contributing before one files, mainly for the sake of Schedule I and how you fill it out (where you have to fill in your gross and subtract taxes, SS, and OTHER). Basically the six months that you average before. I know this doesn't count on the means test, but I am trying to find out what the consensus is on Schedule I. There are so many conflicting stories. Anyone recent into filing and know the real answer?