In re Camile Davis

Sixth Circuit is the first court of appeals to take sides on a lower court split and opine that continuing to make voluntary contributions to retirement plans is excluded from ‘disposable income.’

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Case Type:
Case Status:
Reversed and Remanded
19-3117 (6th Circuit, Jun 01,2020) Published
On direct appeal from bankruptcy court, the Sixth Circuit vacated and remanded an order confirming a Chapter 13 plan after the Debtor amended to include her long-standing 401(k) contributions as disposable income. The Sixth Circuit surveyed the existing split on whether Sec. 541(b)(7)(A) excluded such contributions from disposable income, relied primarily on the rule of statutory construction that a significant change in language is presumed to entail a change in meaning and held that such contributions are excluded from disposable income under Sec. 1325.
Procedural context:
After sustaining the Chapter 13 Trustee's objection to the Debtor's plan, the Debtor amended her plan to include her 401(k) contributions as part of her disposable income and objected to her own plan. The bankruptcy court confirmed the amended Chapter 13 plan and authorized a direct appeal to the Sixth Circuit. The Debtor then appealed the confirmation of her amended plan which required her to cease retirement contributions and include them as part of her disposable income.
Camille Davis filed a Chapter 13 in 2017 and proposed a 60-month Chapter 13 plan with monthly payments of $323. Her expenses included about $220/month as a 401(k) contribution, which she had been making long before filing for relief. The Trustee objected to confirmation, arguing that Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. 2012) required retirement contributions to be included in disposable income. The bankruptcy court sustained the objection, acknowledging that it was only dicta in Seafort which addressed this issue, and that it would certify a direct appeal to the Sixth Circuit if the Debtor wished to pursue the issue. The Debtor amended her plan to increase her monthly payment to $519 (and presumably stopped her retirement contributions), and objected to confirmation of her amended plan. The Court confirmed the amended plan, and the Debtor appealed.
Clay, Larsen & Readler; Opinion by Larsen; Dissent by Readler

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