Are 401(k) Contributions Disposable Income or Not?

For a system that is supposed to rehabilitate personal finances and set debtors back on their feet, Chapter 13 nationwide is schizophrenic about on- going retirement savings, divided about whether post petition contributions to retirement accounts preclude confirmation of a Chapter 13 plan.

Too many courts, in my opinion, come down barring voluntary provisions for old age for the 5 year duration of a Chapter 13 plan, regardless of the age or retirement readiness of the debtor. The plan will dispose of debts, but spit the debtor out of bankruptcy to face penury at retirement.

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moran_cathy
Head of Moran Law Group

Cathy Moran has headed her own small firm Moran Law Group in Redwood City, California, for nearly 30 years. Family law and tax issues as they play out in bankruptcy are areas of particular interest to Cathy.

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