March 2013

In my last post, I discussed retirement contributions within the Chapter 7 context.  Our attention now turns to retirement contributions in a Chapter 13 bankruptcy.

II.        Retirement Contributions In A Chapter 13 Bankruptcy

In discussing Chapter 7, I referred to Form 22A.  The Chapter 13 analogue is Form 22C, which is very similar to Form 22A; but there are some differences.

One difference is Form 22C’s line 55, which permits a debtor to list “Qualified retirement deductions.”  There is no analogue to Form 22C’s line 55 in Form 22A.  This indicates that the Commission that created Form 22 (Form 22A for Chapter 7, Form 22B for Chapter 11, and Form 22C for Chapter 13) believed that Congress wanted Chapter 13 debtors, but not Chapter 7 debtors, to able to contribute to their retirement —presumably to “encourage” debtors to go into Chapter 13, so that their creditors would receive something through the Chapter 13 plan.

Why did the Commission include line 55 in Form 22C?  The best explanation is found in 11 U.S.C. § 541(b)(7).  A little background will help to understand that statutory subsection and its application to the creation of Form 22C.
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This easy question to state has a surprisingly complicated answer.  This is bad news if you were hoping for a simple yes or no, but good news if you’re a fan of more complex legal analysis.  In this post, I’ll discuss retirement contributions within the Chapter 7 context.  In my next post, I’ll discuss retirement contributions in a Chapter 13 bankruptcy.

I.          Retirement Contributions In A Chapter 7 Bankruptcy

There are at least two reasons why Chapter 7 debtors would want to continue contributing to their retirement plans (for linguistic simplicity, let’s assume we’re dealing with a 401(k) plan, since it’s easier to type “401(k)” than “retirement plan”):  First, to provide for those golden years of not having to spend two plus hours a day commuting (those of you who don’t live in a traffic nightmare area like the Los Angeles environs may not understand this problem except on a theoretical level, but it’s very real here), and second, to chew up income to qualify for Chapter 7 relief.
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