In most cases, reasonable 401(k) and other retirement plan contributions can be continued depending on whether you are capable of meeting your statutory obligations while contributing to your retirement plan.
What Are the Advantages of Filing for Chapter 13 Bankruptcy?
It is hard to catch up with your bills when they have started piling up and debt has collected. Unfortunately, a lot of creditors aren’t patient in these situations either. What can you do to get back on the right track?
Filing for Chapter 13 bankruptcy provides relief to debtors in this position. There is no income cap on who can file for Chapter 13 bankruptcy and it can help alleviate some of the problems that have piled up over time. By completing the payment plan approved by the bankruptcy judge, your accumulated credit card debt, personal loans, medical bills and more should be eliminated.
What Is Considered Disposable Income in a Bankruptcy Case?
In Chapter 13 bankruptcy, you work with your lawyer and trustee to come up with a realistic plan for paying down your debts. For the repayment plan to be approved by the court, it must show the ‘best effort’ to decrease the accumulated debt. This means that as much of your disposable income as possible will go towards paying down the unsecured debt.
Disposable income, according to bankruptcy law, is more limited than what you might think. This is the amount of income that is left after taxes, health insurance deductions, necessary living expenses and required payments have been taken out. Required payments in a Chapter 13 case will likely include the monthly amounts due for secured debt (such as mortgage or car loan) and priority debt (such as alimony or child support). TThe disposable income that remains will go towards unsecured debt. This includes personal loans, credit cards and medical bills.
Can I Continue to Make 401(k) Contributions During Chapter 13 Bankruptcy?
Unfortunately, there is no definite answer to this question. It depends on your individual situation and the particular venue in which your case is filed. Sometimes, voluntary retirement contributions, like those for 401(k) plans, are not considered necessary expenses in bankruptcy cases. This means that they may be put on hold as part of the repayment plan. In other jurisdictions, 401(K) or other retirement plan contributions may be continued if they were ongoing, but may not be started within the 6 months prior to filing.
When you file for Chapter 13 bankruptcy, your lawyer will advise you about if you should try to keep making payments to your 401(k) or other retirement plan. Then, the court will make a final decision about ongoing retirement contributions in your particular case when the repayment plan is reviewed.
What about Required Retirement Loan Payments and Contributions?
Payments on a retirement loan are included in your necessary monthly expenses. That means that you will be allowed to continue making payments during the bankruptcy repayment period. If you pay off the retirement loan after filing for Chapter 13, your disposable income will be recalculated, and your repayment plan will be modified.
Sometimes retirement contributions are required as a condition of employment. You will be allowed to continue to make these types of involuntary contributions while working on your Chapter 13 repayment plan.
What Debt Can Be Discharged in Chapter 13 Bankruptcy?
The greatest benefit to filing for bankruptcy is having built up debt eliminated by the end of your case. Most kinds of non-priority unsecured debt can be discharged in Chapter 13 bankruptcy. This includes:
• unpaid credit cards,
• medical bills,
• personal loans,
• past non-priority income tax obligations, and
• outstanding utility bills.
The Chapter 13 repayment plan is designed to help you pay back as much of these non-priority unsecured debts as possible. What remains after successfully completing the bankruptcy repayment plan (a period of three to five years) should be discharged. This means that you will no longer be required to pay back those creditors.
Remember that assets like tax-exempt retirement accounts, including 401(k)s, are considered exempt in Ohio bankruptcy cases.
Find more information about this topic here: Do You Qualify for Chapter 13 Bankruptcy?
Professional Bankruptcy Advice in Your Area
If you’re considering filing for bankruptcy, you need reliable legal advice. Experienced bankruptcy lawyers know how to protect your financial assets and guide you to the best possible outcome. For solid legal assistance in Chapter 13 bankruptcy cases, contact Amourgis & Associates at (844) 218-2721.