Cite as: Keith M. Lundin, Lundin On Chapter 13, § 99.5, at ¶ ____, LundinOnChapter13.com (last visited __________).
The second deduction from current monthly income (CMI) on the way to disposable income that is not mentioned in § 1325(b) is buried in the following exclusion from property of the bankruptcy estate in § 541(b)(7):
(7) any amount—
(A) withheld by an employer from the wages of employees for payment as contributions—
(i) to—
(I) an employee benefit plan that is subject to title I of the Employee Retirement Income Security Act of 1974 or under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986;
(II) a deferred compensation plan under section 457 of the Internal Revenue Code of 1986; or
(III) a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986; except that such amount under this subparagraph shall not constitute disposable income as defined in section 1325(b)(2); or
(ii) to a health insurance plan regulated by State law whether or not subject to such title; or
(B) received by an employer from employees for payment as contributions—
(i) to—
(I) an employee benefit plan that is subject to title I of the Employee Retirement Income Security Act of 1974 or under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986;
(II) a deferred compensation plan under section 457 of the Internal Revenue Code of 1986; or
(III) a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986; except that such amount under this subparagraph shall not constitute disposable income, as defined in section 1325(b)(2); or
(ii) to a health insurance plan regulated by State law whether or not subject to such title[.]1
Not unlike the exclusion of pension loan repayments from disposable income in § 1322(f),2 the cryptic statements that the amounts described in subparagraphs (A) and (B) of § 541(b)(7) “shall not constitute disposable income” do not give us all the information we need to make this adjustment with certainty. The conditions for exclusion from disposable income in § 541(b)(7) are quite different from the conditions on the exclusion of pension loan repayments in § 362(b)(19).3
The exclusion from disposable income in § 541(b)(7) applies to any amount “withheld by an employer from the wages of employees”4 or “received by an employer from employees”5 for payment as contributions to an employee benefit plan, deferred compensation plan or tax-deferred annuity specified in the statute. In other words, contributions to qualified employee benefit plans, deferred compensation plans or tax-deferred annuities are excluded from disposable income whether “withheld” by an employer from the wages of an employee or simply “received” by an employer from an employee.
Amounts “withheld by an employer from wages” may be relatively easy to determine by looking at a debtor’s pay stubs or the like. But contributions “received by an employer” from the debtor are a broader notion that could be interpreted to include amounts a debtor contributed in the past. In context, § 541(b)(7)(B) was probably intended to insulate from the bankruptcy estate prepetition contributions received by an employer before the petition from employees as payments to qualified plans. Transported into the disposable income context, it is not obvious how debtors should account for contributions received by an employer that were not withheld from wages but that satisfy the conditions for exclusion in § 541(b)(7)(B). It is arguable that the debtor can exclude from disposable income similar contributions to be made in the future whether withheld from wages or not.
In any case, amounts withheld or received by an employer for payment as contributions to qualifying retirement plans are excluded from disposable income, and debtors must figure out what amount to exclude. This problem is similar to accounting for pension loan repayments under § 1322(f).6 CMI is a monthly amount.7 Disposable income is not a monthly amount—except it is calculated that way in Official Form B22C.
To exclude contributions to retirement plans described in § 541(b)(7), the debtor has to calculate the “monthly average” of those contributions and enter that amount at Line 55 of Official Form B22C. For purposes of this monthly average, what will be the total amount withheld from wages or received by an employer as contributions, and how is the sum of those amounts averaged? If there are elections available to the debtor that would change the amount withheld, can/should the debtor make those elections before or after the Chapter 13 petition? Does the size of this exclusion from disposable income change if the debtor can elect to increase or reduce amounts withheld or received by an employer? Does an amount qualify for exclusion from disposable income only if it is withheld at the petition? Can the debtor initiate a withholding after the filing of the Chapter 13 case but before confirmation and claim the exclusion from disposable income in § 541(b)(7)? The exclusion from property of the estate for which § 541(b)(7) was designed fits poorly as an exclusion from disposable income in a Chapter 13 case.
Because contributions to employee benefit plans, deferred compensation plans and tax-deferred annuities as described in § 541(b)(7) do not involve incurring debt, debtor’s counsel faces no prohibition under § 526 against advising the debtor to initiate or increase contributions to a retirement plan before filing a Chapter 13 case. New § 541(b)(7) presents Chapter 13 debtors an opportunity to voluntarily establish wage contributions that will benefit only the debtor and that will reduce amounts that must be paid to unsecured creditors to satisfy the disposable income test in § 1325(b). BAPCPA contemplates this result as part of a larger effort to protect retirement plans in bankruptcy cases.
1 11 U.S.C. § 541(b)(7) (emphasis added), discussed further in § 403.1 [ Property of the Chapter 13 Estate—New Ins and Outs ] § 46.2 Property of the Chapter 13 Estate—Changes by BAPCPA.
2 See 11 U.S.C. § 1322(f), discussed in § 491.1 [ Pension Loan Repayments ] § 99.4 Pension Loan Repayments.
3 See 11 U.S.C. § 362(b)(19), discussed in § 58.10 Pension Loans Exception after BAPCPA and § 99.4 Pension Loan Repayments.
4 11 U.S.C. § 541(b)(7)(A).
5 11 U.S.C. § 541(b)(7)(B).
6 See § 491.1 [ Pension Loan Repayments ] § 99.4 Pension Loan Repayments.
7 See 11 U.S.C. § 101(10A), discussed in §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19 Form 122C-1: Statement of Current Monthly Income and 468.1 [ Current Monthly Income: The Baseline ] § 92.3 Current Monthly Income: The Baseline.
Gorman v. Cantu, 713 F. App'x 200, 203–04 (4th Cir. Dec. 18, 2017) (unpublished) (Diaz, Thacker, Harris) (Converting pension loan repayment into pension contribution is not bad faith when pension contribution is less than maximum allowed amount and debtor had some history of making pension contributions. Showing of good faith is minimum requirement for exclusion of postpetition retirement contributions from disposable income. Over dissent, the Circuit panel does not resolve propriety of pension contributions. “[C]ourts have come to ‘three divergent’ conclusions as to whether debtors may exclude voluntary retirement contributions from disposable income, turning largely on their differing interpretations of 11 U.S.C. § 541(b)(7) . . . . This appeal, however, does not require that we resolve that statutory issue. . . . [T]he Trustee argues . . . that a showing of good faith is a minimum requirement for exclusion of post-petition retirement contributions, and . . . that the bankruptcy court erred in its good-faith determination. . . . The bankruptcy court’s finding of good faith in this case is not clearly wrong. . . . That the Debtor sought to resume making contributions does not demonstrate bad faith. . . . [T]he Debtor’s proposed annual contribution of approximately $3,200 is well below the maximum allowable contribution of $18,000, and the Debtor has no other retirement benefits.”), aff'g 553 B.R. 565, 572–77 (Bankr. E.D. Va. July 14, 2016) (Kennedy) (Embracing Baxter v. Johnson (In re Johnson), 346 B.R. 256 (Bankr. S.D. Ga. July 21, 2006), and rejecting Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010), and Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012), which affirmed the BAP on other grounds, debtor can begin retirement plan contributions when retirement loans are paid off, and full amount of retirement contributions is deductible from current monthly income to determine projected disposal income so long as amount is consistent with good faith. “The issue of voluntary retirement contributions has been the subject of some debate . . . . There are essentially three divergent lines of cases. The first line of cases holds that the debtor is not entitled to any deduction for voluntary retirement contributions, whether or not he or she was making voluntary retirement contributions pre-petition. . . . The second view, that voluntary retirement contributions may be continued post-petition as long as they are consistent with the debtor’s pre-petition history of contributions, is represented by the Sixth Circuit Bankruptcy Appellate Panel’s decision in In re Seafort . . . . The third line of cases, which is the majority view, concludes that Section 541(b)(7) allows the deduction, whether or not the debtor was making voluntary contributions prior to the bankruptcy filing, but subject to a determination of the debtor’s good faith. . . . The Court . . . adopts the Johnson view, for the simple reason that Section 541(b)(7) does not limit the debtor’s ability to make contributions post-petition, nor is there any distinction between pre-petition contributions and post-petition contributions in the statute. There is nothing in the text of Section 541(b)(7) from which the Court can conclude that Congress intended any such distinctions. . . . [T]he absolutist position represented by . . . the Sixth Circuit’s opinion in Seafort places an unwarranted emphasis on the placement of Section 541(b)(7) outside of Chapter 13. . . . Under . . . the Sixth Circuit’s opinion in Seafort, the enactment of Section 541(b)(7) in 2005 would have been redundant for pre-petition contributions, given 541(c)(2) and Patterson v. Shumate[, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992)]. . . . The Court similarly rejects the middle ground represented by the Sixth Circuit B.A.P.’s opinion in Seafort. The . . . B.A.P.’s requirement that post-petition contributions be comparable to the debtor’s historic, pre-petition contributions appears to be grounded more in policy concerns than in the text of Section 541(b)(7).”).
Seafort v. Burden (In re Seafort), 669 F.3d 662, 672, 673 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague) (Section 541(b)(7) exclusion from disposable income of voluntary contributions to 401(k) plans is limited to contributions as of case commencement; debtor may not use income remaining after full payment of loans to renew funding of 401(k) plan because income becoming available was projected disposable income that must be distributed to unsecured creditors. Although § 1322(f) provides that amounts required to repay 401(k) loans are not disposable income, § 1306 captures property acquired after commencement of case. "Congress's placement of 401(k) loan repayments within Chapter 13 itself and placement of the exclusion for voluntary retirement contributions elsewhere was deliberate. . . . The easy inference is that Congress did not intend to treat voluntary 401(k) contributions like 401(k) loan repayments, because it did not similarly exclude them from 'disposable income' within Chapter 13 itself." Argument that voluntary 401(k) contributions were excluded from Chapter 13 plans because § 1306(a) included § 541's exclusions "ignores § 541(b)(7)'s express relationship with § 541(a)(1), whereby only those interests in property set forth in § 541(b)(7)(A) in existence as of the commencement of a debtor's case are excluded from property of the estate. Only by reading § 541(a)(1) and § 541(b)(7)(A) together can sufficient meaning be given to both sections of § 541."), aff'g on other grounds 437 B.R. 204, 209-11 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum) (Citing Hamilton v. Lanning, 560 U.S. 505, 130 S. Ct. 2464, 177 L. Ed. 2d 23 (June 7, 2010), and citing McCarty v. Lasowski (In re Lasowski), 575 F.3d 815 (8th Cir. Aug. 12, 2009) (Bye, Colloton, Gruender), and Nowlin v. Peake (In re Nowlin), 576 F.3d 258 (5th Cir. July 17, 2009) (King, Dennis, Elrod), when debtor is eligible for but not making contributions to qualified retirement plan at the petition, plan cannot commence contributions to retirement plan when retirement loans are repaid. "[O]nly 401(k) contributions which are being made at the commencement of the case are excluded from property of the estate under § 541(b)(7). . . . Notably, [§ 1306], which addresses property and earnings that come into existence after the debtor files a petition for relief does not exclude 401(k) contributions from property of the estate. . . . [Section] 541(b)(7) does not exclude income which becomes available post-petition in order to start making contributions to a 401(k) plan . . . . Conspicuously, § 541(b)(7) makes no reference to 'projected disposable income.' . . . Income which becomes available after the filing of a case is 'projected disposable income' and that income is not excluded from property of the estate. Projected disposable income must be used to pay creditors pursuant to § 1325(b)(1)(B) and may not be used to commence making payments to a 401(k) plan. . . . Because repayment of a 401(k) loan during the life of the plan can be reasonably anticipated at the time of confirmation, the Panel concludes that post-petition income that becomes available after 401(k) loans are repaid must be considered as projected disposable income available to unsecured creditors."), rev'g No. 08-3380, 2009 WL 1767627, at *2 (Bankr. E.D. Ky. June 22, 2009) (Howard) (401(k) contributions are excluded from disposable income notwithstanding that debtors stopped making contributions before petition and propose to resume contributions when repayment of retirement loans is completed during plan. "[P]articipation in a 401(k) plan is an ongoing endeavor, and while loan payments may take the place of contributions for the life of the 401(k) loan, the income stream that funds both loan payments and plan contributions is the same. Loan payments and plan contributions are alternative participation vehicles, and neither needs to be committed to the Debtors' Chapter 13 plans.").
Nowlin v. Peake (In re Nowlin), 576 F.3d 258 (5th Cir. July 17, 2009) (Projected disposable income includes income that will become available when 401(k) loan repayment is complete in month 24, net of any permitted increase in the debtor's 401(k) contribution. At petition, debtor was contributing $1,062.51 to 401(k) plan and was repaying 401(k) loan at rate of $1,134.79 per month. The 401(k) loan would be paid off in 24th month. Proposed plan increased contributions to 401(k) plan after month 24 to maximum permitted ($1,250 per month). Bankruptcy court first held that once 401(k) loan was repaid, repayment amount became available as projected disposable income. With respect to the 401(k) contribution: "the Plan . . . proposes to use the additional amounts available during [the three years after 401(k) loan is paid] to further fund her existing 401(k) account . . . . [T]he Debtor may increase her 401(k) contribution amount to the maximum allowed limit and then any surplus over that amount must go to the Plan as projected disposable income. Under 11 U.S.C. § 541(b)(7), amounts given to ERISA qualified employee benefit plans (EBPs) do not constitute property of the estate. . . . [A] debtor may only exclude a contribution up to the permitted limit of the EBP. . . . In the instant matter, the Debtor's 401(k) plan allows for no more than $15,000.00 per annum, that is, $1,250.00 per month, to be deducted from her paychecks and put into the account. . . . [W]hen the 401(k) loan is satisfied, only $187.49 of that newly available disposable income can legally be applied to the 401(k) plan.").
Parks v. Drummond (In re Parks), 475 B.R. 703, 708 (B.A.P. 9th Cir. Aug. 6, 2012) (Jury, Markell, Hollowell) (Voluntary contributions to 401(k) retirement plan are included in projected disposable income notwithstanding § 541(b)(7)(A). "[B]y reading § 541(a)(1) and § 541(b)(7)(A) together, the most reasonable interpretation of § 541(b)(7)(A) is that it excludes from property of the estate only those 401(k) contributions made before the petition date. . . . '[S]uch amount' referred to in the hanging paragraph of § 541(b)(7)(A) means that only prepetition contributions shall not constitute disposable income. . . . [T]he term 'except that' in the hanging paragraph was designed simply to clarify that the voluntary retirement contributions excluded from property of the estate are not postpetition income to the debtor. . . . [Section] 1306(a)(2) makes postpetition earnings of a debtor part of his or her estate but nowhere in chapter 13 are voluntary retirement contributions excluded from disposable income."), aff'g No. 11-60050-13, 2011 WL 2493071 (Bankr. D. Mont. June 22, 2011) (Kirscher) (Declining to reconsider In re Prigge, 441 B.R. 667 (Bankr. D. Mont. Mar. 4, 2010) (Kirscher), and rejecting In re Johnson, 346 B.R. 256 (Bankr. S.D. Ga. July 21, 2006) (Dalis), § 541(b)(7) applies to voluntary 401(k) contributions withheld by an employer at the petition date but does not insulate future retirement contributions from disposable income analysis.).
Miner v. Johns, 589 B.R. 51, 57–62 (W.D. La. May 23, 2018) (Foote) (Rejecting Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague), voluntary retirement account contributions are excluded from disposable income by § 541(b)(7). Good-faith analysis of voluntary retirement account payments must include totality of circumstances, including that contributions are excluded from disposable income test. “Bankruptcy courts have struggled to interpret the relationship between section 541(b)(7) and section 1325(b)(2) . . . . The first approach, known as the [In re Johnson, 346 B.R. 256 (Bankr. S.D. Ga. July 21, 2006) (Dalis)] approach, is the most favorable to debtors. . . . [D]ebtors are permitted to shelter retirement contributions from unsecured creditors into qualifying employment benefit plans . . . as long as the contributions are within the legal limits allowed by the Internal Revenue Service. . . . The Johnson approach appears to be the majority view based on the number of bankruptcy courts that have examined this issue. . . . Taking the opposite position, the [In re Prigge, 441 B.R. 667 (Bankr. D. Mont. Mar. 4, 2010) (Kirscher)] approach holds that debtors cannot deduct voluntary retirement contributions when computing disposable income. . . . The third approach strikes a balance between the two, and allows the deduction of voluntary retirement contributions to be excluded from disposable income to the extent the contributions were already being made when the petition was filed. See [Burden v. Seafort (In re Seafort), 437 B.R. 204 [(B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum)] . . . . Although the placement by Congress of the ‘hanging paragraph’ at issue is perhaps awkward, the plain language demonstrates that Congress intended to exclude retirement contributions from available disposable income as defined by the code in section 1325(b). . . . Congress intentionally added the phrase to exclude all retirement contributions from a debtor’s disposable income. . . . This Court agrees with the Bankruptcy Court’s finding that a debtor’s post-petition contributions to a 401(k) plan are one of many elements it must consider in determining good faith.”, rev'g and remanding No. 16-10441, 2017 WL 1011419, at *6–*10 (Bankr. W.D. La. Mar. 14, 2017) (Norman) Appearing to agree with Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague), although the money debtors would use for voluntary retirement contributions is disposable income and § 541(b)(7) is not an exclusion like § 1322(f), under Hamilton v. Lanning, 560 U.S. 505, 130 S. Ct. 2464, 177 L. Ed. 2d 23 (June 7, 2010), the debtors’ retirement contribution is known and virtually certain and is an allowable expense, subject to tests for reasonableness and good faith. “[B]ased on the holding in Seafort, this Court[ ] holds that post-petition voluntary 401k contributions are not excluded from disposable income. . . . This Court does not go so far as to hold that 11 U.S.C. § 541(b)(7) does not authorize a Chapter 13 debtor to make some limited reasonable voluntary post-petition retirement contributions. . . . [A]bove median income debtors’ expenses are limited, in certain categories, to amounts set forth in the National and Local Standards. These standards
RESFL FIVE, LLC v. Ulysse, No. 16-cv-62900-BLOOM/Valle, 2017 WL 4348897, at *3
In re Melendez, 597 B.R. 647 (Bankr. D. Colo. Feb. 20, 2019) (McNamara) (Without deciding whether or to what extent the projected disposable income test permits Chapter 13 debtors to make retirement contributions, plan lacks good faith under § 1325(a)(3) when debtor will contribute $995 per month for 60 months to retirement account and pay nothing to unsecured creditors. Applying totality-of-circumstances test, debtor who wants to retire early and stiff his credit card lenders lacks good faith.).
In re Davis, No. 17-70784, 2017 WL 4898166, at *3
In re Tydingco, No. 1:14-bk-0070, 2016 WL 1033878, at *10 (Bankr. D. Guam Jan. 27, 2016) (Manglona) (Citing Parks v. Drummond (In re Parks), 475 B.R. 703 (B.A.P. 9th Cir. Aug. 6, 2012) (Jury, Markell, Hollowell), and Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague), "Lawrence may deduct payments made on his 401(k) loan from his projected disposal [sic] income until the loan is repaid, see 11 U.S.C. § 1322(f), but may not deduct voluntary payments to his 401(k) plan, see 11 U.S.C. § 541(b)(7).").
In re Thi Vu, No. 15-41405-BDL, 2015 WL 6684227, at *2-*4 (Bankr. W.D. Wash. June 16, 2015) (Lynch) (Voluntary retirement contributions made during six-month prepetition period for calculation of current monthly income are excluded from projected disposable income. "Section 541(b)(7)(A) and the hanging paragraph have caused wide disagreement among courts . . . . The majority . . . [hold] that voluntary retirement contributions do not constitute disposable income, regardless of whether the debtor was making contributions at commencement of the case. . . . Following the Sixth Circuit Bankruptcy Appellate Panel in [Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum)], some courts have held that voluntary retirement contributions do not constitute disposable income, but only to the extent that those contributions were being made by the debtor as of the petition date. . . . [O]ther courts have held that voluntary retirement contributions may not be excluded from disposable income at all. . . . In [In re Bruce, 484 B.R. 387 (Bankr. W.D. Wash. Dec. 11, 2012) (Lynch)], the Court went beyond the analysis of [In re Prigge, 441 B.R. 667 (Bankr. D. Mont. Mar. 2, 2010) (Kirscher),] and [Parks v. Drummond (In re Parks), 475 B.R. 703 (B.A.P. 9th Cir. Aug. 6, 2012) (Jury, Markell, Hollowell),] holding that § 541(b)(7)(A)(i)'s hanging paragraph excludes pre-petition voluntary retirement contributions from the calculation of 'current monthly income' . . . . If those contributions are deducted before determining the debtor's income during that six-month period pre-petition, those contributions are not 'disposable income' as that term is defined in § 1325(b)(2), and the monthly average of the contributions during the six[-]month period pre-petition should not be included in the calculation of CMI for purposes of calculating disposable income. . . . Using this approach, for all chapter 13 debtors, voluntary retirement contributions may be excluded from the calculation of disposable income, to the extent that those contributions were being made pre-petition during the six-month look-back period used to determine CMI.).
In re Vanlandingham, 516 B.R. 628, 629-37 (Bankr. D. Kan. Sept. 30, 2014) (Nugent) (Citing Hamilton v. Lanning, 560 U.S. 505, 130 S. Ct. 2464, 177 L. Ed. 2d 23 (June 7, 2010), 401(k) contributions are deductible expenses for purposes of projected disposable income calculation notwithstanding that contributions began after petition. Debtor submitted paperwork to enroll in 401(k) plan before she filed Chapter 13 petition, but contributions began after the filing. "[W]hile the § 541(b)(7) exclusion from disposable income is oddly placed, nothing in the Code requires that a debtor have established 401(k) contributions prior to filing a chapter 13 case. Consistent with the 'forward looking approach' of projected disposable income articulated by the Supreme Court in Lanning and in the absence of a lack of good faith objection under § 1325(a)(3), the debtor's plan should be confirmed. . . . The courts are divided on the meaning of § 541(b)(7)'s hanging paragraph and its interplay with § 1325(b)(2)'s calculation of disposable income . . . . Three lines of cases have developed . . . . The first . . . concludes that both prepetition and postpetition 401(k) contributions are excluded from the calculation of disposable income, whether or not debtor was making contributions at commencement of the case. . . . A second view was expressed by the Sixth Circuit Court of Appeals in [Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague)] . . . . The Sixth Circuit concluded . . . that only those 401(k) payments or contributions being made on the petition date were excluded from projected disposable income. . . . A third view . . . holds that no voluntary post-petition contributions to debtor's 401(k) plan, whatever the amount, are excluded from disposable income. . . . [T]he § 541(b)(7) exclusion from property of the estate refers to 'any amount withheld,' without any temporal limitation. . . . Limiting the effect of the § 541(b)(7) exclusion to prepetition contributions or conditioning the exclusion of postpetition contributions upon the existence of pre-existing contributions would effectively nullify the exclusion in chapter 13 cases. . . . There is no reason to protect postpetition 401(k) loan repayments, but not postpetition 401(k) contributions in chapter 13. . . . Excluding known or ascertainable employee retirement contributions or loan repayments from disposable income is entirely consistent with Lanning's reasoning even when the debtor first commences 401(k) withholding postpetition after not having participated in her employer's 401(k) plan prior to filing.").
In re Read, 515 B.R. 586, 588-90 (Bankr. E.D. Wis. Aug. 19, 2014) (Kelley) (Debtor with CMI less than applicable median family income cannot deduct voluntary contributions to a 401(k) account that began after the petition. Debtor applied to begin 401(k) contributions before the petition, but actual contributions began after the petition. "[C]ourts have developed at least three different approaches to determine whether Chapter 13 debtors can make voluntary 401(k) contributions without running afoul of the disposable income requirements. The . . . [Baxter v. Johnson (In re Johnson), 346 B.R. 256 (Bankr. S.D. Ga. July 21, 2006) (Dalis),] approach—permits the deduction of voluntary retirement contributions when calculating disposable income, subject to a good faith analysis. . . . Under this view, a Chapter 13 debtor can deduct voluntary post-petition contributions to calculate disposable income, even if the debtor was not making the contributions at the time of filing. The converse position, frequently called the [In re Prigge, 441 B.R. 667 (Bankr. D. Mont. Mar. 4, 2010) (Kirscher)] view, holds that § 541(b)(7) completely forbids a debtor from deducting voluntary retirement contributions to compute disposable income. . . . Prigge reasoned that Congress created an express exclusion for 401(k) loan repayments in § 1322(f), but did not include a similar exception for 401(k) contributions. . . . A third view, adopted by the bankruptcy appellate panel in [Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum)], allows the deduction of voluntary retirement contributions only to the extent that contributions were being made when the petition was filed. . . . [T]he Sixth Circuit Court of Appeals considered an appeal in Seafort. . . . According to the court of appeals, 'Congress's placement of 401(k) loan repayments within Chapter 13 itself and placement of the exclusion for voluntary retirement contributions elsewhere was deliberate. . . . The easy inference is that Congress did not intend to treat voluntary 401(k) contributions like 401(k) loan repayments, because it did not similarly exclude them from "disposable income" within Chapter 13 itself.' . . . [T]he Debtor's timing in this case is fatal to her arguments. She did not start making contributions until after the petition date. The hanging paragraph in § 541(b)(7)(A) is applicable only to voluntary contributions existing as of the commencement of the bankruptcy case by virtue of § 541(a)(1).").
In re Melander, 506 B.R. 855, 867-68 (Bankr. D. Minn. Mar. 13, 2014) (Ridgway) ($216 per month for voluntary retirement contributions is reasonable for a 61-year-old debtor. "Courts are split on this issue. . . . Because [the debtor] has been making these voluntary contributions for the last 14 years, there is no reason to suggest that her motivation in doing so was anything but in good faith. Moreover, [the objecting creditor] failed to establish an evidentiary basis sufficient to refute [the debtor's] testimony that this expense was appropriate under the circumstances.").
In re Hall, No. 12 B 43452, 2013 WL 6234613, at *5-*11 (Bankr. N.D. Ill. Oct. 22, 2013) (Hollis) (Rejecting Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague), voluntary 401(k) contributions are excluded from disposable income and plan satisfies projected disposable income test notwithstanding that contributions will continue after confirmation. In dicta, plan could increase or begin 401(k) contributions without violating § 1325(b). During the six months prior to the petition, pay advices showed regular 401(k) contributions of 10% of gross earnings. Debtor proposed to continue making voluntary 401(k) contributions consistent with the prepetition practice. Unsecured creditors would receive a 3% distribution. "Three lines of case law developed to interpret [the] hanging paragraph [in § 541(b)(7)(A)]. First, 'a majority of courts have interpreted section § 541(b)(7) as unequivocally removing [voluntary retirement contributions] from the projected disposable income calculation under § 1325(b)(2).' . . . Three courts [have] departed from [the majority] viewpoint, allowing continued contributions but not increased or new contributions. . . . The third camp, led by Seafort . . . , holds that the specific language of § 1322(f) excepting 401(k) loan repayments from disposable income—but not 401(k) contributions—means that Congress knew how to draft an exclusion to disposable income and declined to do so for 401(k) contributions. . . . This effectively prohibits any voluntary contributions from income earned after the petition date. . . . This inference is unsupported. Chapter 5 applies equally to all bankruptcy cases. . . . To repeat in Chapter 13 the statement already made in Chapter 5 that 401(k) contributions shall not constitute disposable income would be merely surplusage. . . . If property is not property of the estate, it may still constitute disposable income. . . . [Section] 541(b)(7) contains no temporal limitation while many other subparagraphs of § 541 do. . . . [P]ostpetition voluntary retirement contributions must be excluded from the calculation of . . . projected disposable income. . . . [A]lthough it is not necessary to do so for purposes of today's decision, the court finds that even if Hall were beginning those retirement contributions postpetition and had made no contributions during the six months prior to filing her case, her future contributions would still be excluded from projected disposable income. . . . [T]he hanging paragraph of § 541(b)(7) tells us that the funds withheld or received by an employer for contribution to a 401(k) plan shall not constitute disposable income. . . . [C]ontributions to a 401(k) plan do not make the transition from current monthly income to disposable income. . . . What if Hall had not been making prepetition 401(k) contributions, but decided to start or increase them postpetition? The court would take that known or reasonably certain fact into account when calculating projected disposable income. . . . This result places a retirement contribution on the same footing as repayment of a retirement loan, which is exempted from disposable income under Section 1325(f) of the bankruptcy code. . . . [T]here is no compelling reason to favor payment of retirement loans over contributions. . . . [B]oth prepetition and postpetition voluntary 401(k) contributions are excluded from disposable income, even if the debtor begins or increases those contributions after the commencement of the bankruptcy case. . . . We are never faced with the question of whether 401(k) contributions are a necessary expense because those contributions do not constitute disposable income in the first place. . . . Any potential abuse is easily forestalled by the requirement of § 1325(a)(3) that plans must be 'proposed in good faith.'").
In re Jensen, 496 B.R. 615, 620-24 (Bankr. D. Utah July 26, 2013) (Thurman) (Adopting BAP analysis in Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum), aff'd on other grounds, 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague), voluntary retirement contributions being made at the petition are excluded from projected disposable income. Distinguishing Anderson v. Cranmer (In re Cranmer), 697 F.3d 1314 (10th Cir. Oct. 24, 2012) (Murphy, Holloway, O'Brien), good-faith analysis includes consideration of voluntary retirement contributions that are excluded from projected disposable income. Debtors' concern with future solvency of Social Security system supports finding of good faith in commencement of voluntary retirement contributions three months before petition. Plan proposed 10.8% dividend to unsecured creditors based on pro rata distribution of $2,352. "The majority view . . . interprets § 541(b)(7) to permit voluntary retirement contributions pre- and post-petition to be deducted in the calculation of disposable income. . . . The minority view . . . holds that § 541(b)(7) completely prohibits a debtor from using post-petition voluntary retirement contributions in the equation for determining disposable income. . . . A third view, advocated by the Sixth Circuit Bankruptcy Appellate Panel in its case of In re Seafort, interprets the relevant Code sections to conclude that only those voluntary retirement contributions being made at the commencement of the case are excluded from disposable income. . . . The Court agrees with the reasoning of the Sixth Circuit Bankruptcy Appellate Panel and concludes that voluntary retirement contributions being made as of the date of petition do not constitute disposable income and debtors may continue making those contributions during the life of the plan. . . . [T]his approach is consistent with the legislative history of the BAPCPA amendments. While Congress expressed a desire that 'debtors repay creditors the maximum they can afford,' Congress also stated that BAPCPA allows debtors to shelter some retirement accounts. . . . [T]here are significant differences between SSI and voluntary retirement contributions such that a good faith inquiry is warranted in this case. . . . [T]he Debtors' deduction for voluntary retirement contributions does not show bad faith. . . . [T]he Debtors commenced the contributions fewer than three months prior to bankruptcy, and over the length of the Plan, the Debtors will make approximately $32,500 in retirement contributions . . . . The Debtors' . . . explanation provides a plausible reason for their action. On the one hand, any growing problems with Social Security did not become a matter of public knowledge overnight, but on the other hand, the 2012 presidential election did push those problems to the forefront of the national consciousness. The Court makes no comment or finding as to whether the Debtors' concern about the future viability of Social Security has any merit, only that they had a concern that prompted their action. . . . When a debtor commences voluntary retirement contributions close to the petition date in an amount that leaves a relatively small dividend to unsecured creditors, the Trustee and the Court will be concerned about the debtor's good faith.").
In re Drapeau, 485 B.R. 29, 36-39 (Bankr. D. Mass. Jan. 8, 2013) (Boroff) (Rejecting Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. Feb. 15, 2012) (Suhrheinrich, Gibbons, McKeague), good-faith voluntary contributions to qualified retirement plan are excluded from projected disposable income. "Section 1306 incorporates all of § 541 . . . . And because § 541(b)(7) expressly excludes voluntary retirement contributions from the bankruptcy estate, there is no need for § 1306 to contain a duplicative provision excepting such contributions. . . . [T]here was no reason to provide a further deduction in either § 1325(b)(2) or § 707(b)(2) for voluntary retirement contributions because those amounts 'are not subtracted from current monthly income . . . they simply "do not constitute disposable income" under § 1325(b) in the first place. . . . '. . . [P]ortions of BAPCPA were . . . intended to create new protections for retirement savings. . . . [Section] 541(b)(7) excludes postpetition voluntary contributions to the retirement plans and annuities specified therein from the scope of disposable income under § 1325(b)(2), so long as made in good faith. That good faith determination is case-specific and will often turn on whether a debtor has made contributions in similar amounts over an extended period of time. But where, as here, there is a history of similar prepetition contributions, . . . any good faith obstacle has been overcome.").
In re Bruce, 484 B.R. 387, 389-94 (Bankr. W.D. Wash. Dec. 11, 2012) (Lynch) (401(k) contributions during six months before petition are excluded from property of the estate, are not included in the CMI calculation and are not projected disposable income. "Bruce is a below median debtor. . . . The 401(k) contributions in this case are reasonably necessary for the maintenance and support of the debtor and his dependents. . . . [T]he average of contributions made to the 401(k) during the six months prior to filing must be excluded from Bruce's income in calculating 'current monthly income' and in turn from the calculation of 'disposable income' under 11 U.S.C. § 1325(b)(2), as provided in 11 U.S.C. § 541(b)(7)(A)(i). . . . [T]he monthly amount contributed ($160.33) is reasonable relative to the debtor's gross monthly income ($5501.37) . . . . 'Today, for most Americans, pensions are history and the 401(k) is the main event, after Social Security.' . . . [C]ourts looking at the treatment of 401(k) contributions and loan repayments have recognized a new solicitude in BAPCPA to 401(k) and similar plans. . . . '[T]he harsh approach toward 401(k) contributions taken by courts pre-BAPCPA is no longer warranted.' . . . It is unfair for a debtor making reasonable contributions to a 401(k) plan to be barred from deducting those amounts in determining disposable income, while similarly-situated employees with involuntary contributions to a defined benefit plan are allowed to fully deduct those contributions before determining disposable income. . . . Reading the 'except that' clause at the end of § 541(b)(7)(A)(i) and the definition of disposable income in § 1325(b)(2) together, the import of § 541(b)(7)(A) is that not only are prepetition contributions to a 401(k) plan not property of the estate . . . but that 'such amounts' also do not count as disposable income as calculated under § 1325(b)(2). . . . [T]he inclusion of that clause was intended to make clear that those contributions 'shall not constitute disposable income as defined in section 1325(b)(2).' . . . The 'except that' clause excludes those contributions during the look-back period from CMI, and by extension, from disposable income. . . . The Sixth Circuit Bankruptcy Appellate Panel took an approach similar to what this Court is advocating when it held that a debtor could not commence 401(k) payments when a 401(k) loan was paid off during a plan because the exclusion in § 541(b)(7)(A) is limited to prepetition contributions to such plans. In re Seafort, 437 B.R. 204 (6th Cir. BAP 2010). At the same time, that Court concluded that if the debtors were making contributions to 401(k) plans when the case commenced, which they were not, they could continue to make those contributions, relying on the language excluding such amounts . . . . This decision was upheld by the Sixth Circuit in Seafort v. Burden, 669 F.3d 662 (6th Cir.2012), although the Sixth Circuit did state in footnote 7 to its decision, that it did not believe that 401(k) contributions could be deducted in calculating disposable income . . . . The Sixth Circuit acknowledged that that issue was not before the Court, . . . and the approach advanced today by this Court appears not to have been raised by the parties. . . . The exclusion of 401(k) contributions from disposable income is in § 541(b) . . . . Neither provision is located where one might expect to see deductions from disposable income, § 1325(b)(2). Instead, their location appears to be driven by the placement of the other provisions dealing with 401(k) loan repayments and 401(k) contributions to which they are appended, and their location denotes no significance on the question of their effect on disposable income. . . . In summary, this Court accepts [the Parks v. Drummond (In re Parks), 475 B.R. 703 (B.A.P. 9th Cir. Aug. 6, 2012) (Jury, Markell, Hollowell),] holding that under § 541(b)(7)(A) only prepetition 401(k) contributions are excluded from property of the estate and therefore only prepetition contributions are excluded from disposable income as defined in § 1325(b)(2). But this Court further holds that the 'except that' clause at the end of § 541(b)(7)(A)(i) excludes prepetition contributions from the calculation of CMI if such contributions were made in the six-month look-back period. If 401(k) contributions are deducted from the debtor's income during that six-month period prepetition, they are not disposable income 'as that term is defined in section 1325(b)(2),' and the monthly average of the contributions during that period must be deducted in the calculation of disposable income.").
In re Paliev, No. 11-17647-BFK, 2012 WL 3564031, at *11 (Bankr. E.D. Va. Aug. 17, 2012) (Kenney) (Increase in 401(k) contributions before the petition is not bad faith and is allowed continuing deduction to determine projected disposable income. "[T]he Debtor's pre-petition increase in her 401(k) contributions is not viewed as bad faith by the Court, in this case. The Debtor testified that she increased her contributions when her husband returned to his employment, after being unemployed for some period of time. The Debtor's desire to maximize her retirement benefits is not inconsistent with the obligation of good faith under the Bankruptcy Code. . . . '[B]y excluding 401(k) contributions from property of the estate and expressly removing them from the definition of disposable income under section 1325(b), see 11 U.S.C. § 541(b)(7), Congress has implemented a policy of protecting and encouraging retirement savings'[ ].").
In re Green, No. 11-60506-B-13, 2012 WL 8255556 (Bankr. E.D. Cal. May 7, 2012) (unpublished) (Lee) (Debtor cannot continue to make voluntary contributions to 403(b) retirement plan notwithstanding exclusion in § 541(b)(7).).
In re Williams, No. 11-30332, 2012 WL 423853, at *2 (Bankr. S.D. Ga. Jan. 23, 2012) (Barrett) (When 401(k) loan is repaid 23 months into Chapter 13 plan, debtor cannot redirect payments to make retirement contributions. "When a Debtor has not been funding his 401(k) for at least 8 years before he filed this bankruptcy petition and well before he borrowed from the 401(k) it is inappropriate to allow him to start funding [his] retirement with the income previous[ly] used to repay the loan to the detriment of his unsecured creditors. . . . All these cases used the forward-looking approach to determine that funds used to repay 401(k) loans constituted projected disposable income which must be used to pay unsecured creditors once the 401(k) loans are repaid.").
In re Egan, 458 B.R. 836, 843-50 (Bankr. E.D. Pa. Aug. 30, 2011) (Coleman) (Rejecting Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum), Chapter 13 debtors are not prohibited from increasing amount of postpetition contributions to a 401(k) plan, subject to review for good faith. At petition, debtors had both regular 401(k) contributions and 401(k) loan repayments. Plan proposed to complete repayment of 401(k) loans and to then increase amount of 401(k) contributions by a portion of the loan repayment amounts. "[A] split of opinion has developed among courts as to whether the text of § 541(b)(7) permits debtors to increase the amount of their post-petition retirement contributions. In one camp, courts infer from the context of § 541(b)(7) within § 541 that the amount of a debtor's retirement contributions must be fixed as of the petition date. . . . In the other camp, courts have determined that the omission of language limiting the amount of contributions grants debtors the discretion to set the amount of their post-petition contributions at any amount and this discretion is limited only by the good faith requirement imposed by § 1325(a)(3). . . . [I]n a third camp, at least one court has found that as a matter of law § 541(b)(7) does not permit post-petition retirement contributions in any amount regardless of whether or not a debtor was making prepetition retirement contributions. . . . Central to the [Seafort] analysis was the omission of language from § 1306 providing for the exclusion of 401(k) contributions. . . . The preamble of § 1306 and subsection (a)(1) both make reference to the entirety of § 541, not just § 541(a). The text provides no basis to read the references in § 1306 to § 541 to incorporate only the inclusions provided under § 541(a) and not the exclusions provided under § 541(b). . . . [T]his Court is unable to infer from the text of § 1306(a)(2) any intent to limit the application of § 541(b)'s exclusions to property existing as of the petition date. . . . '[U]nlike the provisions of § 707(b)(2) and § 1325(b)(2) or (3), § 541(b)(7) does not modify excluded contributions based on reasonableness or necessity.' . . . Unlike § 707(b)(2), not only did Congress omit the term 'applicable,' or any other qualifying language from § 541(b)(7), § 541(b)(7) refers to 'any amount.' Consistent with the Supreme Court's opinion in [Ransom v. FIA Card Services, N.A., __ U.S. __, 131 S. Ct. 716, 178 L. Ed. 2d 603 (Jan. 11, 2011)], this court infers from the absence of any term creating a threshold for eligibility that Congress did not intend to limit § 541(b)(7)'s scope to the amount of a debtor's prepetition retirement contributions. . . . If pursuant to [Hamilton v. Lanning, 560 U.S. 505, 130 S. Ct. 2464, 177 L. Ed. 2d 23 (June 7, 2010)], this Court 'may account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation,' . . . this Court sees no reason to depart from this rule in application of § 541(b)(7). . . . [T]his Court must also interpret BAPCPA's provisions consistent with policy favoring personal retirement savings. . . . Congress intended to tilt this balance in favor of retirement savings and away from ensuring debtors pay to creditors the maximum amount that they can afford. . . . Together with § 1322(f) and § 362(b)(19), § 541(b)(7) reflects Congress' decision to depart from the standard policy of ensuring maximum repayment to unsecured creditors. In BAPCPA's legislative history, Congress specifically recognized that amendments relating to 'some retirement, education, and other savings generally would make less money available [to creditors].' . . . [W]here the facts of a specific case indicate that a debtor may be attempting to game the system by increasing the amount of pre or post-petition 401(k) contributions, courts should rely on the good faith requirement of § 1325(a)(3) to deny plan confirmation. . . . Having found that § 541(b)(7) contains no basis to adopt a per se rule prohibiting increases in post-petition 401(k) contributions, this Court finds that, absent additional circumstances, bad faith cannot be inferred from the Debtors' decision to increase their post-petition 401(k) plan contributions.").
In re McCullers, 451 B.R. 498, 503-05, 505 n.8 (Bankr. N.D. Cal. June 8, 2011) (Carlson) (Dissecting Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum), In re Johnson, 346 B.R. 256 (Bankr. S.D. Ga. July 21, 2006) (Dalis), and In re Prigge, 441 B.R. 667 (Bankr. D. Mont. Mar. 4, 2010) (Kirscher), § 541(b)(7) excludes from projected disposable income only prepetition voluntary retirement contributions; Chapter 13 debtors with CMI greater than applicable median family income cannot make any voluntary postpetition contributions to a retirement plan if a creditor or the trustee objects under § 1325(b). "[T]he most natural reading of section 541(b)(7) is that it excludes from property of the estate only those contributions made before the petition date. . . . Seafort and Prigge are more persuasive than the Johnson decisions, because they both limit the amount excluded from disposable income to prepetition contributions. . . . However appealing the result achieved in Seafort, close analysis of the language of the statute suggests that Congress actually intended the much more limited effect recognized in Prigge. . . . Congress's use of the words 'except that' is entirely consistent with the Prigge decision, which held that the purpose of the statute was merely to clarify that the exclusion of certain prepetition contributions from property of the estate did not give rise to disposable income to the debtor. . . . Debtor may not make voluntary postpetition contributions to his retirement plan." In a note: "[T]here are circumstances in which a chapter 13 debtor can make postpetition contributions to a qualified benefit plan. First, the court need not determine disposable income or projected disposable income unless the trustee or an unsecured creditor objects . . . . [I]t is the trustee and unsecured creditors who determine the reasonableness of voluntary retirement contributions of an above-median-income debtor. Second, contributions required by an employer can be deducted in determining disposable income under the IRS guidelines incorporated into section 707(b). . . . Third, the expenses that may be claimed by a below-median-income debtor are not limited to those specified in section 707(b) and the IRS guidelines, and such a debtor may be able to establish that voluntary contributions are reasonable and necessary expenses.").
In re Hager, 447 B.R. 876, 878 (Bankr. D. Minn. Apr. 13, 2011) (O'Brien) (One reason plan fails projected disposable income test is that debtor "continues to contribute voluntary 401(k) contributions of $663.00 monthly. These voluntary contributions are from disposable income that must be paid into a plan.").
In re Noll, No. 10-35209-svk, 2010 WL 5336916, at *2 (Bankr. E.D. Wis. Dec. 21, 2010) (Kelley) (Citing Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. Sept. 14, 2010) (Boswell, McIvor, Shea-Stonum), debtor not contributing to an ERISA-qualified plan at the petition cannot begin making 401(k) contributions once a 401(k) loan is repaid during plan. "[O]nly 401(k) contributions in existence before the debtor filed bankruptcy are excluded from disposable income. . . . 'Notably, [§ 1306], which addresses property and earnings that come into existence after the debtor files a petition for relief does not exclude 401(k) contributions from property of the estate.' . . . 'Because Congress identified 401(k) contributions as excluded in § 541, but not in § 1306, . . . the absence of any reference in § 1306 to 401(k) contributions was intentional.' . . . [T]he Debtors may only exclude their loan repayments from disposable income so long as they are loan repayments. As soon as the loan is satisfied, the shield of § 1322(f) is removed, and the funds become available to creditors. If the Debtors had been making voluntary contributions pre-petition, they would be allowed to continue those contributions, but they cannot convert loan repayments into voluntary contributions and satisfy the Code's projected disposable income test.").
In re Barbutes, 436 B.R. 518, 527 (Bankr. M.D. Tenn. Sept. 8, 2010) (Paine) ("Sidecar IRA" is not a qualified contribution for § 541(b)(7) purposes but is a deductible "special circumstance" for purposes of § 707(b)(2)(B). "Section 541(b)(7) excludes from 'property of the estate' only those specific employer benefit plans listed in the statute, and unfortunately for the debtors does not include their voluntary Roth IRA contributions. While the court cannot allow the deduction as a qualified retirement plan, it can allow the IRA contributions as a 'special circumstance' pursuant to § 707(b)(2)[(B)](ii). Mr. Barbutes is 52 years old and has a limited amount of years he is employable in his profession as a pilot. Mrs. Barbutes already suffers from chronic back pain as a result of her work as a hygienist and is also likely limited in her employment life span. Today's America, which promotes not relying solely on Social Security requires some retirement savings. For these debtors, the court finds the Roth IRA contributions are allowed as a special circumstance for which there is no reasonable alternative.").
In re Smith, No. 09-64409, 2010 WL 2400065, at *2-*3 (Bankr. N.D. Ohio June 15, 2010) (unpublished) (Kendig) (401(k) contributions are excluded from property of Chapter 13 estate and excluded from disposable income; however, when debtor increased 401(k) contribution from 3% of income to 15% of income on eve of Chapter 13 filing, bad faith under § 1325(a)(3) prohibits confirmation. "[T]he debtors' contributions to 401(k) plans are excluded from the debtors' disposable income. . . . Congress did not intend to handicap the courts' good faith inquiries or unintentionally create a loophole through which debtors could redirect their incomes from creditors at the last moment. . . . However, the enactment of section 541(b)(7) injected a policy favoring retirement savings into the bankruptcy code. Therefore, the harsh approach toward 401(k) contributions taken by courts pre-BAPCPA is no longer warranted. . . . Mr. Smith increased his 401(k) contribution by five times on the eve of filing bankruptcy to a level far beyond what was typical for him. Furthermore, the increase reduced the distribution to unsecured creditors by more than half. Finally, the debtors present no financial-planning justification for the increase. The Court finds that under these circumstances the debtors' 401(k) contributions go far beyond reasonably measured retirement planning and are unfair to unsecured creditors.").
In re Roth, No. 10-13287/JHW, 2010 WL 2485951, at *2 (Bankr. D.N.J. June 14, 2010) (unpublished) (Wizmur) ("[A]mounts withheld or received by employers from employees for various benefits plans are not property of the estate and are not disposable income for purposes of section 1325(b)(2). 11 U.S.C. § 541(b)(7). . . . The debtor represents and creditor does not contest that his 401(k) contributions have remained constant for several years. He is not required to apply these funds toward the plan.").
In re Prigge, 441 B.R. 667, 677 (Bankr. D. Mont. Mar. 4, 2010) (Kirscher) (Citing Egebjerg v. Anderson (In re Egebjerg), 574 F.3d 1045 (9th Cir. Aug. 3, 2009) (Hawkins, Berzon, Clifton)—and interpreting § 541(b)(7) to only exclude from disposable income amounts already withheld by an employer for remittance to a retirement fund—voluntary contributions to 401(k) plan are not an allowable expense for a debtor with CMI greater than applicable median family income and must be paid to unsecured creditors through disposable income test; if contributions were mandatory, the Egebjerg prohibition would not apply but plan would still fail disposable income test. "Egebjerg held that it was error to allow the debtor to deduct his 401(k) loan repayment from disposable income for purposes of the means test, even though § 1322(f) would specifically allow repayment of a loan from a 401(k) plan in a chapter 13. The instant case does not involve repayment of a loan, however, but instead involves Prigge's voluntary contributions to his 401(k) plan. No provision similar to § 1322(f) . . . is cited by the Debtor as authority to exclude voluntary 401(k) contributions . . . . If Congress had intended to exclude voluntary 401(k) contributions from disposable income[,] it could have drafted § 1322(f) to provide for such an exclusion, or provided one elsewhere. The absence of any exclusion of voluntary 401(k) contributions from the Code simply reinforces the Court's conclusion that Egebjerg and the IRS guidelines provide that contributions to voluntary retirement plans are not a necessary expense." In a footnote, exclusion of contributions to employee benefit plans in § 541(b)(7) and provision that excluded contributions do not constitute disposable income are inapplicable to voluntary 401(k) contributions because § 541(b)(7) deals only with funds in an employer's hands at filing of bankruptcy.).
In re Gibson, No. 09-01196-JDP, 2009 WL 2868445, at *2-*3 (Bankr. D. Idaho Aug. 31, 2009) (Pappas) (Debtors can begin contributions to 401(k) plan just prior to filing Chapter 13 without violating good-faith requirement, and contributions are excluded from disposable income for § 1325(b) purposes. "Whether Debtors had been making retirement contributions prior to filing their petition is of no moment in the disposable income analysis because the Code expressly excepts such contributions from a debtor's disposable income. . . . Even if Debtors had not decided to begin making contributions to their 401(k) plan until after they filed their bankruptcy petition, the contributions would still not be classified as disposable income. . . . [T]he mere existence of monthly contributions to retirement plans does not necessarily evidence bad faith. . . . [A] debtor may not completely shelter available resources in a retirement plan at the expense of his creditors. . . . Reasonable, measured planning for retirement is responsible and should be encouraged provided the amount of plan contributions are [sic] balanced and proportionate to amounts being paid on debt.").
In re Glisson, No. 08-21449, 2009 WL 5322426 (Bankr. S.D. Ga. June 19, 2009) (Dalis) (Creditor's argument that 401(k) contributions should be included in projected disposable income is inconsistent with Code as amended by BAPCPA, but even if argument is accepted, objection to confirmation would be moot because debtor would still have negative disposable income.).
In re Jones, No. 07-10902-13C, 2008 WL 4447041, at *4-*5 (Bankr. D. Kan. Sept. 26, 2008) (Somers) (That debtors began contributions to retirement plan after the petition is not by itself evidence that plan lacks good faith. "[M]oney an employer withholds from an employee's wages to contribute to a retirement plan like the Wife's is neither property of the bankruptcy estate nor disposable income in a Chapter 13 case. This Congressional protection for such contributions could be interpreted to mean a 'good faith' analysis of a debtor's Chapter 13 plan can never rely on the fact the debtor is making such contributions to find a lack of good faith. . . . [T]he Court concludes the fact the Debtors are contributing to a retirement plan can be considered in analyzing their good faith in proposing their plan. . . . Although the Debtors began making the contributions while they were in bankruptcy, they are contributing only about one-half (or less) of the full amount the Wife could legally contribute to the plan. In other circumstances, a debtor who commences retirement contributions while in a bankruptcy case might be demonstrating a lack of good faith, but that is no so in this case.").
In re Mati, 390 B.R. 11 (Bankr. D. Mass. June 9, 2008) (Feeney) (401(k) contribution of 10% of gross income is not bad faith when plan proposes to pay at least 50% to unsecured creditors. "[T]he Debtor's 401(k) contributions do not evidence bad faith under the totality of the circumstances in this case. The Debtor is merely taking advantage of what the law allows. Indeed, by excluding 401(k) contributions from property of the estate and expressly removing them from the definition of disposable income under section 1325(b), . . . Congress has implemented a policy of protecting and encouraging retirement savings. . . . [D]ebtors, pursuant to section 541(b)(7), may shelter contributions to certain qualified employee benefit plans. . . . [U]nder appropriate circumstances, particularly if the debtor's contributions exceed those legally permitted, a good faith inquiry may be warranted. This is not such a case.").
In re Garrett, No. 07-3997-3F3, 2008 WL 6049236, at *1 (Bankr. M.D. Fla. Jan. 18, 2008) (Funk) (BAPCPA placed contributions to 401(k) plan outside disposable income calculation without regard to whether debtor is above or below applicable median family income. "401k contributions and loan repayments are not disposable income without regard to whether a debtor is below or above the median income.").
In re Oltjen, No. 07-60534-RCM, 2007 WL 2329695, at *3 (Bankr. W.D. Tex. Aug. 13, 2007) (Monthly contribution to ERISA-qualified pension plan is excluded from disposable income notwithstanding that debtor started contributions just before filing Chapter 13 case. "Under 11 U.S.C. § 541(b)(7), mandatory or voluntary amounts given to ERISA qualified employee benefit plans do not constitute property of the estate. . . . [T]he contributions are not a deduction because they were never included in income in the first instance. . . . [Section] 541(b)(7) contains no language that benefit plan contributions be reasonable or necessary.").
In re Puetz, 370 B.R. 386 (Bankr. D. Kan. June 22, 2007) (Under § 1322(f), contributions to 401(k) account are not included in disposable income.).
In re Shelton, 370 B.R. 861, 865-69 (Bankr. N.D. Ga. June 11, 2007) (Retirement account contributions are excluded from Chapter 13 estate by § 541(b)(7) and not included in disposable income calculation by § 1322(f), but totality-of-circumstances version of good-faith test in § 1325(a)(3) and factors from Kitchens v. Georgia Railroad Bank & Trust Co. (In re Kitchens), 702 F.2d 885 (11th Cir. 1983), apply when plan pays nothing to unsecured creditors but debtors contribute $655 per month to retirement plan. "[R]etirement contributions are excluded from the definition of property of the estate in § 541(b)(7) . . . . Retirement account contributions in § 541(b)(7) are not subtracted from current monthly income because they are exempted or excluded from the calculation; they simply 'do not constitute disposable income' under § 1325(b) in the first place. . . . BAPCPA expressly limited the application of § 541(b)(7) to one particular paragraph, § 1325(b)(2). Section 1325(b)(2) is also limited to a specific application: '[f]or purposes of this subsection.' Had Congress sought to soften the good faith requirement, a statement to that effect is conspicuously absent. . . . Debtor proposes a zero percent dividend . . . and a contribution of $655 a month to his retirement plan. . . . Such a grossly disproportionate plan invites scrutiny. Debtor is under no legal or practical compulsion to pay $655 a month to his retirement account. The record is inconclusive as to whether debtor made a similar retirement contribution pre-petition and, if so, for how long. . . . Achieving an appropriate balance between payment of unsecured creditors and saving retirement funds is the natural end of viewing the totality of Debtor's circumstances. That result cannot be achieved in this case without additional evidence . . . including the details of all prepetition contributions.").
In re Devilliers, 358 B.R. 849, 864-65 (Bankr. E.D. La. Jan. 9, 2007) ("[M]andatory or voluntary contributions to qualified retirement plans are not property of the estate, nor are they considered when calculating disposable income. . . . [U]nlike the provisions of § 707(b)(2) and § 1325(b)(2) or (3), § 541(b)(7) does not modify excluded contributions based on reasonableness or necessity.").
In re Njuguna, 357 B.R. 689, 690 (Bankr. D.N.H. Aug. 17, 2006) ("Section 541(b)(7) provides that 401k contributions 'shall not constitute disposable income as defined in section 1325(b)(2).' . . . [P]roperty listed in section 541(b) does not become part of the bankruptcy estate. . . . 401k contributions are not property of the bankruptcy estate. Property that is not part of the bankruptcy estate is not subject to being considered for any part of a Chapter 13 plan.").
Baxter v. Johnson (In re Johnson), 346 B.R. 256, 263 (Bankr. S.D. Ga. July 21, 2006) (Chapter 13 debtors are permitted to shelter contributions to employee benefit plans for purposes of disposable income test. "So long as a debtor's contributions are within the limits legally permitted by the [employee benefit plan], 'any amount' of this contribution is exempted from disposable income. . . . Debtors may fund 401(k) plans in good faith, so long as their contributions do not exceed the limits legally permitted by their 401(k) plans.").