Doing The “End Around” To Evade 401(k) Contributions…? No Chance Says The Bankruptcy Court!

401kIntroduction by Gerard T. Forgét III, JD, MBA, LLM(TAXATION), Omaha, NE

As with many expenses, the Debtor’s Counsel will attempt to include as many expenses as possible in the calculation of disposable net income. This “strategy” involves both Pre-Petition and Post-Petition actions by the Debtor. The Eastern District of Tennessee recently decided on a case involving the voluntary contributions into the Debtors 401(k) Plan. The case involved both a current contribution (Post-Petition) to the Plan and “contributions” for a loan from the Plan (Pre-Petition) by the Debtor. Of interest as well was the Trustee’s argument that the Debtor acted in “Bad Faith” when she excluded such monthly payments in Disposable Net Income. Jenkins Opinion 7-5-12

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