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Max out Retirement contribution prior to filing?

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    Max out Retirement contribution prior to filing?

    I had a consultation today and most likely will have to file chapter 13. I had dropped my contributions to 1%. Attorney said it would be a good idea to max it out which would be 6%. Is the common advice? Won’t be filing for probably another month or two.

    #2
    Yes, this is common practice. So long as you don't have an open loan with your 401(k), then the practice is to make the maximum contribution at which the company will match. Contributing to a 401(k) (or retirement account) is allowed in Chapter 13s. Congress specifically made sure that debtors could save money while in a Chapter 13 through this method.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


      #3
      Unless something changed you can contribute to the 401K as long as you are in a 100% payback plan. The day we went to court for our 341, we were told we could continue contributing for that reason; however if our status changed, that would change. Others (not in a 100% plan) were told they couldn't. I don't know if there is a difference if you're not in a 100% plan but can show you've been contributing for a period of time, or unless you can show that a contribution is required per your employment agreement. All I know is it wasn't a given that you could contribute because it wasn't fair to take care of yourself and not the creditors. (Do a web search for what NOLO has to say, it backs up what I'm saying).
      Last edited by sophieanne; 02-09-2019, 02:10 PM.
      Filed Chapter 13 - 07/20/12
      Discharged 8/2/16

      Comment


        #4
        sophieanne, the poster, severest, is in Kansas which is in the 10th Circuit. I believe that only the 9th circuit (BAP and not the full en banc 9th circuit) made that silly ruling back in 2012. I say it's silly because Congress specifically wrote into the BAPCPA 2005 that ERISA (retirement) income did "not constitute disposable income as defined in section 1325(b)(2)." So I don't know where they pulled that one out of thin air. I think the 9th Circuit BAP (Bankruptcy Appellate Panel), and not the full 9th Circuit en banc court, is the only to have made such a decision. In other circuits, Trustee attacks on contributions have been futile unless the debtor is also trying to pay back a loan from that 401(k)... which is more like double dipping.

        So thanks for pointing out that this is different in the 9th Circuit due to the (silly) ruling back in 2012. (The 9th Circuit Court of Appeals covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington (plus Guam and some other Pacific islands).
        Last edited by justbroke; 02-10-2019, 03:26 PM.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


          #5
          justbroke - thanks for clarifying that. I filed in late 2012 in (Washington state) the 9th circuit; lucky us . I think it's an important point though to show filers, that not every trustee or every state or every circuit court does things the same way; something we see in responses that come up during different posts.
          Filed Chapter 13 - 07/20/12
          Discharged 8/2/16

          Comment


            #6
            Originally posted by sophieanne View Post
            justbroke - thanks for clarifying that. I filed in late 2012 in (Washington state) the 9th circuit; lucky us . I think it's an important point though to show filers, that not every trustee or every state or every circuit court does things the same way; something we see in responses that come up during different posts.
            Exactly! Bankruptcy is not always a one-size-fits-all and it is important to make sure the differences are known. I didn't know that the 9th Circuit (BAP) made such a silly ruling until you posted!

            Thank you sophieanne for keeping me honest and pointing out the 9th Circuit's decision. That's the great part about our community. We all are here to offer our assistance based on our personal experience. Sometimes, our experiences are not enough to cover every conceivable variation. Otherwise, we'd all likely be bankruptcy attorneys or judges.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment

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