FLA Middle District and not in 100% Plan

[chelle]

Calling all Fla Middle District 13ers...

Has anyone had any luck with being able to keep part or all of your tax refund? My lawyer is checking with the trustee to see if my husband and I will be able to keep any of it. Anyone else had any luck?

[Lissy]

Well, I was able to keep mine this year because I received it before I filed. But my understanding is that in future years, I will have to send refunds to the TT.

[chelle]

Thanks for the reply. I filed 12/24/09, so we will see what the trustee says.

[smkrishna]

Well...This is an important question for me. I am getting different answers from different attorneys and different people in this forum. How do we know for sure whether practically (not from rules/books) do we have to submit the tax refund to the trustee or not?

[justbroke]

The rule in Middle District is that all refunds go to the Trustee and plan. Just check your Order of Confirmation to see. Also, the Trustees in the Middle District allow you to send the refund to them and write a letter explaining what you need the money for. For example, needed medical or home or care repairs will usually get you some of the money back.

Unless your attorney pro-rated your refund into your current monthly income calculation, there's no escaping the dreaded turnover of refund. (Although you can write a letter indicating that you need the refund for necessities, but you still end up turning over the refund, and waiting for an answer.)

[smkrishna]

Justbroke......Thanks for your reply to my question. I have one more question for which I dont want to open a separate thread. How does trustee finds out whether the 401(k) contribution is a voluntary or mandatory? I was under the impression that 401(k) deduction is valid always in calculating DMI!!!

[justbroke]

They can usually tell if it's mandatory or not, by looking at your paystub. For a Chapter 13, certain 401(k) loan re-payments and contributions are allowed (to a certain point).

Generally speaking, the Trustee won't complain if you're making the "maximum" amount that earns you a match by your company. So if your company matches to 6% (typical), then contributing 6% is okay. However, you must have been contributing 6% well before filing! Otherwise, you may get some grief from the Trustee.

[smkrishna]

Justbroke, the attorney that I went for an initial consultation told me that it's only mandatory 401(k) contributions are allowed. I found the same thing in Means test calculator at the website:
LegalConsumerWebsiteForBankruptcyMeansTest

26 Mandatory payroll deductions
Enter the total average monthly payroll deductions that are required for your employment, such as mandatory retirement contributions, union dues, and uniform costs. Do not include discretionary amounts, such as voluntary 401(k) contributions.

My company matches upto 4% and I have been making 401(k) contribution from starting of last year (2009). So,it's been more than a year that I am making contribution. But, I know for sure and I confirmed with my company also that it's voluntary contribution and not mandatory.

I am confused about this because if trustee doesn't allow my 401(k) contribution, then my DMI will shoot up easily more than $200 and if he doesn't allow me to make contribution during Ch.13, then I will be at loss!!!

What column/words say in paystub that indicates whether it's mandatory or voluntary contribution. Which company in USA (apart from Govt. jobs) makes 401(k) contribution Mandatory??!

Let me know your viewpoint.

[justbroke]

The attorney is wrong and right, however mostly wrong when it comes to a Chapter 13. Mandatory deductions means that it can go on Schedule I on the income sheet. However, it is clearly Congress' intent in the BAPCPA modifications to the Bankruptcy Code that voluntary 401(k) contributions are not part of the disposable monthly incomeNOT PROPERTY OF THE ESTATE and therefore can't be administered as disposable monthly income. (Unless you choose to include it as part of your income.) This is very settled law everywhere.

This was clear Congressional intent, and any Trustee, Judge or Attorney should be held accountable for saying that ERISA (401(k)) plan loan re-payments or contributions are part of disposable monthly income, in a Chapter 13.

In a Chapter 7, however, 401(k) plan loan re-payments and contributions are part of the Estate and cannot be deducted as an expense, unless they are mandatory.

Please know that in most Districts either a 401(k) contribution or a 401(k) re-payment are allowed exclusively, as they are both considered a contribution. (It is typical that you can only have one of those two... a loan repayment or a contribution. Most Districts consider the loan repayment to be a form of contribution.) Your attorney is wrong, as 401(k) loans are SPECIFICALLY protected under 11 USC 1322(f), which references 11 USC 362(b)(19).

11 USC 1322(f) 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.

11 USC 362(b)(19)... of withholding of income from a debtor's wages and collection of amounts withheld, under the debtor's agreement authorizing that withholding and collection for the benefit of a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986, that is sponsored by the employer of the debtor, or an affiliate, successor, or predecessor of such employer--

(A) to the extent that the amounts withheld and collected are used solely for payments relating to a loan from a plan under section 408(b)(1) of the Employee Retirement Income Security Act of 1974 or is subject to section 72(p) of the Internal Revenue Code of 1986...

If the Attorney was speaking to your strictly on a Chapter 7 basis, then I can see the response. However, it's clear that what he told you doesn't apply to Chapter 13s.

[smkrishna]

Wow!!! Justbroke...You are my Man!! Thanks for such a great detailed response. Attorney should be wrong as he knew that I am going for Ch.13 and still says that I cannot contribute for 401(k)...

You dont know how much help you are doing to others and how much stress you relieve from other's minds... May God Bless You...Thanks a lot Justbroke..

[justbroke]

I forgot to mention that if you look at Official Form B22C (the means test for Chapter 13s), you'll find the allowable deduction for "Qualified retirement deductions" on Line 55! It wouldn't be on the form as an individual line item, if it weren't allowed.

[smkrishna]

Justbroke, I dont see that line in the website that I referred "http://www.legalconsumer.com/bankruptcy/bankruptcy-means-test.php"

I know that it's not official website for means test. But, I can understand what you mean. Thanks again.

[justbroke]

I know that it's not official website for means test. But, I can understand what you mean. Thanks again.

LegalConsumer's Means Test is really for Chapter 7s. That's why you won't find the deduction, unless it's a mandatory payroll deduction.

As a matter of fact, the first major heading on that link you provided reads "Are You Eligible for Chapter 7?".

[smkrishna]

As a matter of fact, the first major heading on that link you provided reads "Are You Eligible for Chapter 7?".

You are right Justbroke. I didn't notice that.. Is there any unofficial website for Ch.13 means test like this?

[justbroke]

You are right Justbroke. I didn't notice that.. Is there any unofficial website for Ch.13 means test like this?

No.

The best thing is to get an Official Form B22C from U.S. Courts Official Forms and just complete the form yourself.