401K Contributions & Loan Chpter 7 or 13?

[KAM465]

Curious to know if anyone has experience in Northern District of Ohio BK Court Summit County on how the Trustee treats 401K Contributions and 401K Loans.

I fail the means test for Chapter 7 but if filed under Chapter 13 and they allow both in addition to other expenses I would be -$143.00 DMI. Would this be grounds enough to push me into Chapter 7? The 401K loan will be paid off in May 2012 and I intend on filing yet this month October 2011

Thanks

[justbroke]

I'm not speaking for your District, but the overwhelming majority of Trustees would see a 401(k) loan expiring soon (probably beofre you are even confirmed) as an expense which shouldn't be allowed. In most District anyhow, you can't both a 401(k) payment and a 401(k) contribution. While some will argue that 401(k) loans are allowed in a Chapter 13 -- and so are 401(k) contributions -- most Trustees only allow one or the other (treating the loan repayment as a "contribution"). Those same debtor attorneys find trouble when the Trustee, in "some" cases, files an objection to confirmation for the reason that the plan is filed in bad faith.

Now, whether the Trustee or United States Trustee (UST) even cares in a Chapter 7, is usually predicated upon whether your case is scrutinized. If you're over-the-median... expect to have your expenses nit-picked. Actually, my District in Florida has found many Ohio cases, on this subject, persuasive. The fact is that Congress excluded the repayment from the Chapter 7 Means Test.

(If you are under-the-median.) I think the fact that your 401(k) loan will be paid off in May 2012 will cause it to not be allowed anyhow. Anything with a reasonable certainty in the near future can be considered.

Eisen v. Thompson, 370 B.R. 762 (N.D. Ohio 2007). The district court reversed the bankruptcycourt’s decision in In re Thompson, 350 B.R. 770 (Bankr. N.D. Ohio 2006), concluding thatretirement plan loans are neither “debts” nor “secured debts” under the Bankruptcy Code. Thedistrict court also found that assessing special circumstances requires the court to analyze whetherthe circumstances that led to taking the loan from the retirement account were “special” orwhether they were not “special” and instead the result of the debtors’ longstanding inability tokeep up with their obligations to creditors. Without more, an occurrence as common as awithdrawal from one’s retirement funds cannot be a “special circumstance.” In the absence ofevidence indicating that the circumstances under which the debtor borrowed the retirement fundswas “special,” it is an abuse of discretion for a court to hold a 401K loan or its repayment to be a“special circumstance.”