Voluntary Retirement Contributions Can Now be Included in a Chapter 13 Budget

The 6th circuit court issued an opinion last month finding that voluntary retirement contributions are acceptable budget items to include in a Chapter 13 repayment plan.  Why is this good news? 

This will allow Chapter 13 bankruptcy filers to:

• Save for their future retirement while they are restructuring, repaying and reducing their debts;
• Reduce their plan payments to the Chapter 13 Trustee by the amount that they are contributing to their 401K;
• This reduces the necessary payback amount to unsecured creditors if the client is proposing a percentage plan, meaning that they are paying back the unsecured creditors at a reduced rate.  Ultimately, whatever unsecured debt remains at the completion of the Chapter 13 plan is legally eliminated with a court discharge.  Many times, even with taking out 401k deduction, we can still propose a 0% dividend to unsecured creditors within the Chapter 13 plan.

The court does require that you have a history of retirement contributions.  If you are considering filing for Chapter 13 in the future, you may want to consider opening a retirement account to begin a record of contributions and savings.

For current clients still in the process of getting their Chapter 13 repayment plan confirmed, we can modify your plan immediately to account for retirement contributions and in most cases lower the plan payment.  For clients with already confirmed cases, we can evaluate adding in this retirement savings if we modify your plan for other reasons, i.e. increased expenses or decreased income.

Our goal is always consistent: resolve debt and place our clients in a better long-term financial position.  This ruling helps to reach this goal by allowing us to encourage clients to save for their future while also resolving current debts that might be impeding their credit.

For more information on your Chapter 13 bankruptcy filing options, call us today for a free consultation.  We offer free in-depth appointments to review your current circumstances and debt concerns, review your income and discuss your long-term goals.  At the free consultation we will determine if:

• filing bankruptcy is right for you;
• which chapter (7 or 13) best resolves your debt and helps you to improve your credit;
• discuss alternatives, such as debt settlement;
• outline the process and steps for our recommended path to debt resolution.

Call us today at 866-261-8282 for a free phone or in office consultation.  We have 6 convenient office locations in:  Detroit, Dearborn, Southfield, Warren, Flint and Ann Arbor, Michigan.