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Retirment plan contribution/repay and B22A, Sch I & J
What's the latest on this issue? I have a Ch 7 debtor who without deducting the non-mandatory 401K contribution and loan fails the means test by $18!
Line 26 on B22A clearly states NOT to list non-mandatory contributions.
If I understand this earlier e-mail correctly, if I were to analyze the same debtor under B22C, I could deduct the 401K contribution and loan, and there would be no DI?! So am i safe in claiming the same in B22A? If so, where?
Any clarification is appreciated.
Thanks.
Susana B. Tolchard
P L wrote:
I don't see any flaw in your analysis except that qualified retirement deductions reduce CMI as not property of the estate rather than as "allowed expenses" and since Form B22A doesn't have a enumerated reduction of CMI for 541(b)(7) (as does Form B22C) you can try to add the voluntary 401k contribution under the additional expense claims section with statement "reduction of CMI pursuant to 541(b)(7)". You can try to add the 401k loan under line 26 of B22A as a mandatory deduction; I believe this is one of the questions on David Tilem's list for Peter Anderson (If you can't, then perhaps you can argue that there needs to be some provision in B22 for priority tax debt resulting form changing a 401k loan to a taxable withdrawal...)
The issue of potential ineligibility for Chapter 7 discharge due to presumption of abuse under B22A versus hypothetical eligibility for immediate discharge where B22C disposable income is zero is still up in the air, but the 9th Circuit should be proving us with helpful decisions in Kagenveama and Garcia very soon.
In my oral argument, I had the opportunity to try to explain to the court that B22A unfairly denies the poorer Chapter 7 debtors the 541(b)(7) CMI reduction in contrast to allowing higher income (over median) Chapter 13 debtors the reduction under B22C; this was done in the context of arguing that the B22A presumption of abuse for Chapter 7 discharge purposes (rebutale by adjusting CMI downward under 707(b)(2)(B)(i) special circumstances) should not be carried over to Chapter 13 to create a rebutable presumption under the 1325(b)(1)(B) disposable income calculation that allows the Trustee to alter the CMI - 1325(b)(2) disposable income calculation (B22C) by seasoning it with actual I & J figures and/or crystal ball gazing projections of furutre changed budget circumstances.
Best luck with your case.
Peter
salanick wrote:
Hoping to not run afoul of 707(b)(2)(B), I have already looked at
541(b)(7) and some case law, but I want to be sure not to miss
something in my analysis. Specifically, whether a client's
contribution to retirement plan(s) and/or retirement loan re-payment
will be considered an "allowed expense", for purposes of both B22A
and Sch I/CMI calculation.
Client would like to file Ch 7 case in LA. She is a teacher with
retirement contributions (voluntary) withheld from each paycheck
(~$400/month). This contribution is to a qualified 403(b) plan and is
IN ADDITION to her STRS contribution (mandatory). She has also taken
a loan against retirement account monies and may want to begin
repayment depending on if can get discharge of this (see 523(a)(18)
and how wold affect CMI.
I believe that whether we "pass" the Means Test depends on if we get
allowed expenses of : (1) voluntary retirement contribution(s); and/or
(2) repayment of retirement account loan.
Incidentally, if forced into a 13, she will at least get the loan
repayment allowance on B22C and will qualify for immediate discharge
(see In re Bullock). This seems an absurd result.
Am I missing something? Your thoughts are greatly appreciated.
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What's the latest on this issue? I have a Ch 7 debtor who without deducting the non-mandatory 401K contribution and loan fails the means test by $18! Line 26 on B22A clearly states NOT to list non-mandatory contributions. If I understand this earlier e-mail correctly, if I were to analyze the same debtor under B22C, I could deduct the 401K contribution and loan, and there would be no DI?! So am i safe in claiming the same in B22A? If so, where? Any clarification is appreciated. Thanks. Susana B. TolchardP L <petermlively2000@yahoo.com> wrote: I don't see any flaw in your analysis except that qualified retirement deductions reduce CMI as not property of the estate rather than as "allowed expenses" and since Form B22A doesn't have a enumerated reduction of CMI for 541(b)(7) (as does Form B22C) you can try to add the voluntary 401k contribution under the additional expense claims section with statement "reduction of CMI pursuant to 541(b)(7)". You can try to add the 401k loan under line 26 of B22A as a mandatory deduction; I believe this is one of the questions on David Tilem's list for Peter Anderson (If you can't, then perhaps you can argue that there needs to be some provision in B22 for priority tax debt resulting form changing a 401k loan to a taxable
withdrawal...) The issue of potential ineligibility for Chapter 7 discharge due to presumption of abuse under B22A versus hypothetical eligibility for immediate discharge where B22C disposable income is zero is still up in the air, but the 9th Circuit should be proving us with helpful decisions in Kagenveama and Garcia very soon. In my oral argument, I had the opportunity to try to explain to the court that B22A unfairly denies the poorer Chapter 7 debtors the 541(b)(7) CMI reduction in contrast to allowing higher income (over median) Chapter 13 debtors the reduction under B22C; this was done in the context of arguing that the B22A presumption of abuse for Chapter 7 discharge purposes (rebutale by adjusting CMI downward under 707(b)(2)(B)(i) special circumstances) should not be carried over to Chapter 13 to create a
rebutable presumption under the 1325(b)(1)(B) disposable income calculation that allows the Trustee to alter the CMI - 1325(b)(2) disposable income calculation (B22C) by seasoning it with actual I & J figures and/or crystal ball gazing projections of furutre changed budget circumstances. Best luck with your case. Peter salanick <salanick@gmail.com> wrote: Hoping to not run afoul of 707(b)(2)(B), I have already looked at541(b)(7) and some case law, but I want to be sure not to misssomething in my analysis. Specifically, whether a client'scontribution to retirement plan(s) and/or retirement loan re-paymentwill be considered an "allowed expense", for purposes of both B22A and Sch I/CMI calculation. Client would like to file Ch 7 case in
LA. She is a teacher withretirement contributions (voluntary) withheld from each paycheck(~$400/month). This contribution is to a qualified 403(b) plan and isIN ADDITION to her STRS contribution (mandatory). She has also takena loan against retirement account monies and may want to beginrepayment depending on if can get discharge of this (see 523(a)(18)and how wold affect CMI.I believe that whether we "pass" the Means Test depends on if we getallowed expenses of : (1) voluntary retirement contribution(s); and/or(2) repayment of retirement account loan. Incidentally, if forced into a 13, she will at least get the loanrepayment allowance on B22C and will qualify for immediate discharge(see In re Bullock). This seems an absurd result.Am I missing something? Your thoughts are greatly appreciated.
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