401(k) deductions in Chpt 13?

[mrdav]

I am in the middle of a MOMOD due to my car dying, then getting permission to incur new debt for a new car. While going over expenses for the MOMOD the lawyer questioned the deductions on my paystub for my 401(k).

Brief note: this is my second MOMOD. I had to do one about a year and a half ago due to losing my job and getting a new one at a salary cut of 40%. At the time of the first MOMOD, I wasn't eligible for my new employer's medical and 401(k). Once I was, I signed up for medical and was automatically enrolled in the company's 401(k) plan. When I originally filed, I had long ago dumped the 401(k) contributions, so it wasn't an issue then (and I was so broke at the time I filed I stupidly took the extra cash on my paycheck rather than put that money away for retirement).

Now the lawyer is telling me that its possible that the trustee will question why I have a deduction now. Up until the lawyer questioned it, I thought it was mandatory at my job because I was automatically enrolled. But it isn't and now the lawyer wants me to cut it. Heres the thing: I'm in my 50's and my plan payment is so tight that I save nothing month to month. This 401(k) is very good and I hate to drop out as I'm no spring chicken and have virtually nothing saved for retirement. It has a 50% eloyer match and its doing very well. Having to dump it for the next 33 months seems like taking a huge hit that will have effects on my financial future that will last much longer than the time I'm still living such an austere lifestyle.

Has anyone here successfully included a 401(k) deduction in a MOMOD when it wasn't included in the original filing? Am I SOL?

[kornellred]

The austerity of your present lifestyle is not of any concern to the Court. If contributing to tax-deferred savings of any sort were allowed, debtors would be able to short-change their creditors in a Chapter 13 to the max (as it were). Any amount of money you contribute to savings during a Chapter 13 is money that could go toward paying down your debts.

There are probably quite a few Chapter 13 debtors who are contributing to their 401k plans and making their plan payments (which could be larger if not for the 401K contributions). The whys and wherefores of this situation are probably dependent upon the opinions of the various circuit courts. The inequality of Chapter 13 rules across the entire nation is one of the US Trustee's major frustrations.

[spidge]

I believe there are higher contribution restrictions after 50 years of age. You can max out after the BK is done. I know you may lose out on the company match for now as I have, but once the BK is complete you may feel more comfortable about contributing at a much higher rate.
I have no experience with modifying a plan.

[LadyInTheRed]

The whys and wherefores of this situation are probably dependent upon the opinions of the various circuit courts. The inequality of Chapter 13 rules across the entire nation is one of the US Trustee's major frustrations.

Yes, this does vary across the country. In the 9th Circuit, which includes California, voluntary 401k contribution are not allowed as deductions from disposable income. Here is the relevant BAP Opinion: http://cdn.ca9.uscourts.gov/datastor...08_06_2012.pdf.

[sophieanne]

Hi ..are you in a 100% plan or less? In a 100% plan you are allowed to contribute to a 401K plan. If it's less, I know that's not allowed (In WA state anyhow)

[mrdav]

Well that's what I was curious about. Bummer! No 401(k) contributions for 33 months.

[mrdav]

no...unfortunately I'm not in a 100% plan. Not anymore. New job just doesn't pay enough.