Contributions to Retirement Plan OK says Wisconsin Bankruptcy Court

30 Jan Contributions to Retirement Plan OK says Wisconsin Bankruptcy Court

Clients ask “Can I keep making contributions to my retirement plan in a Chapter 13 case?” They also ask “can I include contributions to my retirement plan in my budget” for purposes of a chapter 7 case. Why is this important? If your income after taxes is greater than your expense, your chapter 7 case could be challenged. The United States Trustee may claim that your chapter 7 case is an abuse and move to dismiss.

If you file a chapter 13 case, the chapter 13 trustee may want you to stop making contributions to your retirement plan and devote that money to paying your creditors. More money for your creditors and less money for your retirement.

A Wisconsin Bankruptcy Court recently addressed this question in In re Mravik, 2008 WL 5423108 (Bankr. E.D. Wis. Dec. 31, 2008). The court noted that the debtor’s retirement plan contributions represented a reasonable proportion of his income, the debtor’s lifestyle was not extravagant, and Congress specifically decided that such retirement plan contributions do not constitute disposable income available to the debtor.

So the Court held that the debtor’s budget was reasonable and that the debtor’s chapter 7 case would not be dismissed as an abuse.

Although this was not a chapter 13 case, this same argument could be used to allow you to maintain payments under to a retirement plan during the 3 to 5 year term of a chapter 13 case.

Bankruptcy can help you pay your creditors and need not stop you from saving for retirement.

Cutting edge cases like this demonstrate how important it is to work with a cutting edge bankruptcy attorney.

For more information about bankruptcy in Wisconsin, visit us at www.krmbankruptcy.com


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