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Q re Ch 13 401K voluntary & loans on Schedules I & J in
Thanks for your insights. This is a tough one because it is a very close
call between a 13 and a 7. (We went 13 to pay off some taxes over time, but
debtor would rather just pay them with her 401K if she can do a Chapter 7
and be done with all this.) The 13 is a 0% Plan.
I know on B22 in a 7 we can't take either the voluntary 401k or the 401k
loan repayments, but I have been including them both on Schedule I in some
7s and no one has objected so far, so I was just wondering if whether I am
just getting lucky. In this case, on B22 without the 401k stuff, she comes
out +$178. A very close call for a 7. It's on I and J that is a little
dicier and we kind of need to keep that $500 voluntary 401K contribution or
else I really have to dig for some other expenses (which I may be able to do
- debtor had cancer and still gets treatments and I am thinking she is
paying for stuff that she forgot to mention). The problem is that I only
want to amend I and J once, not 2 or 3 times as our wishes change since
obviously that does not look very good.
Holly Roark
holly@roarklawoffices.com
CDCA
On Thu, Jun 3, 2010 at 4:59 PM, Hale Andrew Antico wrote:
>
>
> 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
>
> ------------------------------
> *From:* cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] *On Behalf
> Of *Holly Roark
> *Sent:* Wednesday, June 02, 2010 2:06 PM
> *To:* cdcbaa@yahoogroups.com
> *Subject:* [cdcbaa] Q re Ch 13 401K voluntary & loans on Schedules I & J
> in the valley
>
> 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
>
>
>
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
Thanks for your insights. This is a tough one because it is a very close call between a 13 and a 7. (We went 13 to pay off some taxes over time, but debtor would rather just pay them with her 401K if she can do a Chapter 7 and be done with all this.) The 13 is a 0% Plan.
I know on B22 in a 7 we can't take either the voluntary 401k or the 401k loan repayments, but I have been including them both on Schedule I in some 7s and no one has objected so far, so I was just wondering if whether I am just getting lucky. In this case, on B22 without the 401k stuff, she comes out +$178. A very close call for a 7. It's on I and J that is a little dicier and we kind of need to keep that $500 voluntary 401K contribution or else I really have to dig for some other expenses (which I may be able to do - debtor had cancer and still gets treatments and I am thinking she is paying for stuff that she forgot to mention). The problem is that I only want to amend I andJ once, not 2 or 3 times as our wishes change since obviously that does not look very good.
Holly Roark
holly@roarklawoffices.com
CDCA
On Thu, Jun 3, 2010 at 4:59 PM, Hale Andrew Antico <bk.lawyer@gmail.com> wrote:
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 islikely 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
From: cdcbaa@yahoogroups.com [mailto:
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