Dear Jamie,
I assume you are aware of 11 U.S.C. 1322(f), which provides: "A plan may not materially alter the terms of a loan described in section 362(b)(19) and any amounts required to repay such loan shall not constitute 'disposable income' under section 1325[,]" and 362(b)(19), which deals, inter alia, with 401(k) loan repayments. The wording of 1322(f) seems to imply that the envisioned loan must antedate the plan. Therefore, if the plan has already been confirmed, this subsection may not help you.
However, if the plan has not yet been confirmed, you might try amending the plan pursuant to 1323(a), and then arguing using 1323(b) that since the loan now antedates the plan, 1322(f) should apply. Note that 1322(f) does not require that the loan be prepetition, just that it antedate the plan.
If the plan has already been confirmed you may wish to file a motion to modify the plan due to changed circumstances, and ask that the plan payments be reduced by the amount necessary to repay the loan. The trustee may object and assert that the debtor should have filed a motion to incur new debt before buying the car, but you can counter that the need for a car was an emergency and the debtor didn't have time to get such a motion granted. Moreover, you might point out that if the debtor doesn't repay the loan, she will have an income tax liability - and a 10% penalty for the early 401(k) distribution - that will necessitate an eventual plan modification anyway, so modification is warranted. Depending on your judge, you may get the motion granted.
The trustee may have in mind the unfortunate holding in the very recent BAP case, In re Parks, that Mark Markus posted a couple of days ago. However, that case is distinguishable from your case because Parks dealt with 401(k) contributions rather than 401(k) loan repayments. By the way, I found the BAP's interpretation of 541(b)(7)(A) less than compelling, and wonder if there was something more involved with the debtors' case than came out in the opinion. Perhaps it was one of those "bad facts make bad law" holdings. And since a BAP decision is not binding on bankruptcy judges - other than the judge from whom the appeal was taken - I still plan to put 401(k) contributions on line 55 of Form 22C and see what happens. Otherwise, line 55 becomes meaningless. Apparently, the forms committee felt that 541(b)(7)(A) had meaning and therefore included line 55 in the form. I know that the form is not binding law, but the committee's reasoning might be worth investigating.
Good luck,
Nick
Nicholas Gebelt, Ph.D., J.D.
Certified Bankruptcy Specialist
[Description: cid:
image003.jpg@01CC076B.B14D73C0]
Law Offices of Nicholas Gebelt
15150 Hornell Street
Whittier, CA 90604
Phone: 562.777.9159
FAX: 562.946.1365
Email:
ngebelt@goodbye2debt.com;
ngebelt@gebeltlaw.com
Web:
www.goodbye2debt.com
Blog:
www.southerncaliforniabankruptcylawblog.com/
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
Confidentiality Note: This e-mail is intended only for the person or entity to which it is addressed and may contain information that is privileged, confidential, or otherwise protected from disclosure. Dissemination, distribution, or copying of this e-mail or the information herein by anyone other than the intended recipient, or an employee or agent responsible for delivering the message to the intended recipient, is prohibited. If you have received this e-mail in error, please notify us immediately at 562.777.9159 or e-mail
info@gebeltlaw.com and destroy the original message and all copies.
Representation Note: If you have not signed a contract of representation, the Law Offices of Nicholas Gebelt do not represent you, and this email does not contain any legal advice for you.
IRS Circular 230 Disclosure: In order to comply with the requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
The post was migrated from Yahoo.