I agree that debtors *may *have an argument re: 541(b)(7) in a Chapter 13
case. Unfortunately, though, there is a recent 9th Circuit BAP decision
interpreting 541(b)(7), which says that postpetition retirement
contributions are not allowable as deductions. See Parks v. Drummond,
attached. Granted, it is a BAP opinion, so not necessarily binding on
bankruptcy judges. But it still creates an obstacle for debtors' counsel.
Even if retirement contributions are allowed in Chapter 13 (which seems
debatable), I don't see how that would relate to a Chapter 7 means test.
Hypothetically, a presumption of abuse could arise in a Chapter 7 case
(due to the inability to deduct retirement contributions on the Chapter 7
means test), but debtor could still have a negative DMI in a Chapter 13
case (allowing for retirement contributions). Just my personal opinion,
but I don't think that the futility of a low-percentage Chapter 13 plan,
without more, would persuade most judges that the debtor could rebut the
presumption of abuse in the Chapter 7 case. Especially if the low
percentage is traceable to a voluntary retirement contribution.
Clifford Bordeaux
Bordeaux Law, P.C.
3731 Wilshire Boulevard, Suite 600
Los Angeles, CA 90010
T: 323-762-5529
T: 626-405-2345
F: 626-628-1820
E:
cliff@bordeauxlaw.com
On Fri, May 16, 2014 at 12:50 PM, Catherine Christiansen
christiansenlaw@yahoo.com [cdcbaa] wrote:
>
>
> Cliff: The B22's are different for Ch 13 & 7. One allows the 401K
> deductions and the other doesn't. If the debtor presents the outcome to
> the court of a conversion to Ch 13 showing it will pay nothing, and going
> forward there is no disposable income so the debtor can present a 0 payment
> plan but administration of the plan is silly. So has anyone argued that
> line of reasoning and if so was it successful and if so, in front of who
> did the argument succeed?
>
>
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> 17011 Beach Blvd. Ste 900, Huntington Beach, CA 92647
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>
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>
>
> On Friday, May 16, 2014 10:06 AM, "Clifford Bordeaux
>
cliff@bordeauxlaw.com [cdcbaa]" wrote:
>
>
>
> It is possible that some of our local Chapter 13 trustees may not object
> to the continuation of reasonable prepetition retirement contributions on
> Schedule I--on the theory that *Hamilton v. Lanning* gives courts
> discretion to use I & J, instead of the means test, to determine the
> required monthly payments (maybe we can ask about this at the upcoming
> Chapter 13 program). But Lanning did not explicitly address the issues
> raised in Egebjerg (and Form B22C contains the same instruction as form
> B22A regarding discretionary retirement accounts), so I think that a
> Chapter 13 Trustee could easily object if they think that the proposed plan
> is unreasonable under the totality of the circumstances (ie: maxing out
> retirement contributions in a 0% plan).
>
> Even if the retirement contributions are allowed on Schedule I (or the
> Trustee does not object to them), you still can't deduct these
> contributions on Form B22C.
>
> Clifford Bordeaux
> Bordeaux Law, P.C.
> 3731 Wilshire Boulevard, Suite 600
> Los Angeles, CA 90010
> T: 323-762-5529
> T: 626-405-2345
> F: 626-628-1820
> E:
cliff@bordeauxlaw.com
>
>
>
> On Fri, May 16, 2014 at 9:28 AM, Christine Wilton
>
attorneychristine@gmail.com [cdcbaa] wrote:
>
>
> If the debtor converts to Chapter 13, then she would be permitted to
> make 401k contributions.
>
>
> On Thu, May 15, 2014 at 6:10 PM, Clifford Bordeaux
cliff@bordeauxlaw.com[cdcbaa]
> wrote:
>
>
> The holding in *Craig *related to retirement contributions as reasonably
> necessary in order to maintain a minimal standard of living under 523(a)(8)
> and the Brunner test. The court did not address the permissibility of
> retirement contributions for purposes of 707(b)(2)--the court distinguished
> the Egebjerg case, which held that retirement loan repayments are not
> allowed as means test deductions per 707(b)(2). See *Egebjerg v. Anderson*(In re Egebjerg), 574 F.3d 1045 (9th Cir.2009).
>
> Also, note that the means test form itself, at line 26, instructs the
> debtor as follows: "Other Necessary Expenses: involuntary deductions for
> employment. Enter the total average monthly payroll deductions that are
> required for your employment, such as retirement contributions, union dues,
> and uniform costs. *Do not include discretionary amounts, such as
> voluntary 401(k) contributions. * [Emphasis in original.]
>
> Clifford Bordeaux
> Bordeaux Law, P.C.
> 3731 Wilshire Boulevard, Suite 600
> Los Angeles, CA 90010
> T: 323-762-5529
> T: 626-405-2345
> F: 626-628-1820
> E:
cliff@bordeauxlaw.com
>
>
>
> On Thu, May 15, 2014 at 5:08 PM, Christine Wilton
>
attorneychristine@gmail.com [cdcbaa] wrote:
>
>
> Voluntary 401k contributions are within the courts discretion to allow:
>
> The Ninth Circuit has set forth factors a court should consider in
> determining whether a debtors voluntary retirement contribution is a
> reasonably necessary expense. Bankruptcy courts have discretion to
> determine whether retirement contributions are a reasonably necessary
> expenses for a particular debtor based on the facts of each individual
> case. See *Craig v. Educational Credit Management Corporation* (In re
> Craig), 579 F.3d 1040, 1046 (9th Cir. 2009). The Court in Craig
> continued, describing factors for courts to consider, holding that:
> In making this fact-intensive determination, courts should consider a
> number of factors, including but not limited to: the debtors age, income,
> overall budget, expected date of retirement, existing retirement savings,
> and amount of contributions; the likelihood of stopping contributions will
> jeopardize the debtors fresh start by forcing the debtor to make up lost
> contributions after emerging from bankruptcy; and the needs of the debtor> dependents.
>
>
>
> On Thu, May 15, 2014 at 3:19 PM,
cliff@bordeauxlaw.com [cdcbaa]
cdcbaa@yahoogroups.com> wrote:
>
>
> My input:
> 1. What did debtor say on Statement of Intentions? Are they trying to
> cure the arrearages? Contemplating a Chapter 13 after completion of the 7?
> Trying to get a loan mod? If their stated intention is to stay in the
> house (even if they are behind on payments), then they may draw some
> support from In Re Jensen (Judge Robles case from 2009--available on CACB
> website).
> 2. I think your debtor will lose on this point. Retirement account
> contributions are not allowed as means test deductions in Chapter 7 unless
> the contributions are mandated by the employer. Voluntary 401k
> contributions are not permitted.
> 3. You need a debtor declaration explaining why the expense is reasonably
> necessary.
> 4. I think your debtor will lose on this point.
> 5. See response to #1, above.
>
>
>
>
> --
> Christine A. Wilton, Esq.
> Law Office of Christine A. Wilton
> 5011 Argosy Avenue, Suite 3
> Huntington Beach, CA 92649
>
> Office: 714-533-9210
> Fax: 714-489-8150
> Email:
attorneychristine@gmail.com
> Web:
www.attorneychristine.com
> Blog:
www.losangelesbankruptcylawmonitor.com
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>
> --
> Christine A. Wilton, Esq.
> Law Office of Christine A. Wilton
> 5011 Argosy Avenue, Suite 3
> Huntington Beach, CA 92649
>
> Office: 714-533-9210
> Fax: 714-489-8150
> Email:
attorneychristine@gmail.com
> Web:
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> Blog:
www.losangelesbankruptcylawmonitor.com
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>
>
I agree that debtors may have an argument re: 9th Circuit BAP decision interpreting 541(b)(7), which says that postpetition retirement contributions are not allowable as deductions. See Parks v. Drummond, attached. Granted, it is a BAP opinion, so not necessarily binding on bankruptcy judges. But it still creates an obstacle for debtors' counsel.
Even if retirement contributions are allowed in Chapter 13 (which seems debatable), I don't see how that would relate to a Chapter 7 means test. Hypothetically, a presumption of abuse could arise in a Chapter 7 case (due to the inability to deduct retirement contributions on the Chapter 7 means test), but debtor could still have a negative DMI in a Chapter 13 case (allowing for retirement contributions). Just my personal opinion, but I don't think that the futility of a low-percentage Chapter 13 plan, without more, would persuade most judges that the debtor could rebut the presumption of abuse in the Chapter 7 case. Especially if the low percentage is traceable to a voluntary retirement contribution.
Clifford BordeauxBordeaux Law, P.C.3731 Wilshire Boulevard, Suite 600Los Angeles, CA 90010T: 323-762-5529T: 626-405-2345
F: 626-628-1820E:
cliff@bordeauxlaw.com
On Fri, May 16, 2014 at 12:50 PM, Catherine Christiansen
christiansenlaw@yahoo.com [cdcbaa] <
cdcbaa@yahoogroups.com> wrote:
The post was migrated from Yahoo.