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Q re Ch 13 401K voluntary & loans on Schedules I & J in the valley
Holly,
I've done a few Chapter 13s in the Valley, back before my client base of
Santa Clarita and Palmdale got moved to L.A. I'm still getting my legs
under me there.
Yes, you can expect the trustee to mention the voluntary contributions as a
best efforts issue. They use the "real budget" in the Valley. She is
likely to mention it to you along with a "suggestion" that you increase your
plan payment by $500 to get confirmation. You can counter that, based on
facts particular to your case. If you cannot reach an agreement, a person
with a black robe will decide for you.
Chapter 7 voluntary contributions on Schedule I and B22 could draw a love
letter from the US Trustee, and a possible 707 motion because your client
can probably pay back some of their debts in a Chapter 13.
Recent case law that resembles a good Scrabble hand is on your side with
regard to including them in the B22 in a Chapter 13.
Speaking of case law, I was invited by a judge recently to show why a
secured creditor should have to wait a while for Class 2 arrearages while
the debtor repays a retirement loan to themselves prior to a step-up, when
the real money will be pouring in. Esteemed opposing counsel argued that an
unsecured debt was being placed above a secured debt. Research in this
shows that 401k repayments are not "debts" per se, but actually just a
reduction of income. Case law is consistent in one thing; that retirement
loans are to be treated differently (particularly in 13), up to and
including the recent 9th circuit case referenced above.
Retirement loan repayments are less voluntary, and whether the government
(US Trustee) can force a debtor to incur tax liability by ceasing loan
repayment is something that is worth briefing, if necessary (it merited only
a passing mention in my recent pleading).
I hope this was helpful.
Hale
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Hi,
My apologies for the dumb question, but I have been having "issues" in the
valley and objections to things I have already corrected, so I feel the need
to run this by you.
I have a Chapter 13 in the valley. My debtor has both ongoing voluntary
contributions to her 401K and a 401K loan where the payments will end in
September. Payments on the loan are $316/month, and voluntary contributions
are $500/month.
We had the 341a meeting today and, as expected, the trustee asked for a copy
of the 401K loan statement, which I produced. I know at confirmation she
will say that we have to add $316 to the plan payment because the 401K loan
is going to be paid off soon. In anticipation of that, I am planning to
amend schedule I to remove the $316 401k loan payment. I am also going to
amend schedule J because we proposed a very minimal budget, and I know my
debtor has at least $316 more in basic expenses (like food) that we can
account for, so we will ultimately end up with the same disposable income
even after adding an additonal $316 to the income side. (We proposed a
minimal budget on J because we wanted the plan to be feasible because debtor
is paying off taxes through the plan and really needs the chapter 13.)
My question is, will I have any problem with leaving on the voluntary ($500)
contribution on Schedule I? I know it's appropriate on the means test in a
Chapter 13 to take into account the voluntary contributions to a 401K & loan
repayments on a 401K, but should I worry about any objections to having the
voluntary contributions on Schedule I in the debtor's "real" budget? If
so, I want to make sure that I revise schedule J accordingly as well. (The
debtor has been contributing the same amount to her 401K for a long time.)
(Just FYI, as a side note - on the means test, even if we were to take off
the $316 401k loan payments on line 55, debtor is still negative on line 59,
so we felt comfortable proposing a 36 month plan. However, if we take off
both the voluntary contribution & the loan payment on the means test, the
number is positive, and we would have to do a 60 month plan).
As a related question, in a Chapter 7, can we include 401K contributions and
loan repayments on schedule I without getting objections (even though they
can't be included on the means test)?]
Thanks in advance.
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
Hi,
My apologies for the dumb question, but I have been having "issues" in the valley and objections to things I have already corrected, so I feel the need to run this by you.
I have a Chapter 13 in the valley. My debtor has both ongoing voluntary contributions to her 401K and a 401K loan where the payments will end in September. Payments on the loan are $316/month, and voluntary contributions are $500/month.
We had the 341a meeting today and, as expected, the trustee asked for a copy of the 401K loan statement, which I produced. I know at confirmation she will say that we have to add $316to the plan payment because the 401K loan is going to be paid off soon. In anticipation of that, I am planning to amend schedule I to remove the $316 401k loan payment. I am also going to amend schedule J because we proposed a very minimal budget, and I know my debtor has at least $316 more in basic expenses (like food) that we can account for, so we will ultimately end up with the same disposable income even after adding an additonal $316 to the income side. (We proposed a minimal budget on J because we wanted the plan to be feasible because debtor is paying off taxes through the plan and really needs the chapter 13.)
My question is, will I have any problem with leaving on the voluntary ($500) contribution on Schedule I?I know it's appropriate on the means test in a Chapter 13 to take into account the voluntary contributions to a 401K & loan repayments on a 401K, but should I worry about any objections to having the voluntary contributions on Schedule Iin the debtor's "real" budget?If so, I want to make sure thatI revise schedule J accordingly as well. (The debtor has been contributing the same amount to her 401K for a long time.)
(Just FYI, as a side note- on the means test, even if we were to take off the $316 401k loan payments on line 55, debtor is still negative on line 59, so we felt comfortable proposing a 36 month plan. However, if we take off both the voluntary contribution & the loan payment on the means test, the number is positive, and we would have to do a 60 month plan).
As a relatedquestion, in a Chapter 7, can weinclude401K contributions and loan repayments on schedule I without getting objections (even though they can't be included on the means test)?]
Thanks in advance.
-- Holly Roarkholly@roarklawoffices.comwww.roarklawoffices.comCentral District of CaliforniaConsumer Bankruptcy Attorney
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