JORDEN SALDANA, ET AL V. MARTHA BR
The Ninth Circuit split with the Sixth Circuit in the interpretation of the ‘hanging paragraph’ in Section 541(b)(7). Courts are divided four ways on whether or how much a ‘13’ debtor may contribute to voluntary retirement plans after filing.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Consumer
- Case Status:
- Reversed and Remanded
- Citation:
- 23-15860 (9th Circuit, Nov 22,2024) Published
- Tag(s):
- Ruling:
- Reversing the lower courts, the United States Court of Appeals for the Ninth Circuit ruled that a Chapter 13 debtor who had made voluntary contributions to an employer-sponsored retirement plan could make similar contributions after filing a Chapter 13 petition because the "hanging paragraph" of 11 U.S.C. § 541(b)(7) excludes such contributions from the determination of the debtor's disposable income in a Chapter 13 case.
- Procedural context:
- The Chapter 13 Trustee objected to the debtor's Chapter 13 plan because it excluded the debtor's voluntary contributions to an employer-sponsored retirement plan from the debtor's calculation of disposable income. The bankruptcy court affirmed, and the debtor filed subsequent plans. After the bankruptcy court confirmed the debtor's third amended plan, the debtor appealed to the district court. The district court sustained the Trustee's objection. The debtor then appealed to the district court. The district court affirmed the bankruptcy court. The debtor timely appealed to the United States Court of Appeals for the Ninth Circuit.
- Facts:
- Jorden Saldana filed a Chapter 13 petition to seek relief from certain unpaid taxes and other unsecured debt. In her initial petition, Saldana excluded voluntary monthly contributions of $601 to a qualified retirement plan. The initial plan called for Saldana to pay $300 per month to her plan, with unsecured creditors receiving no distribution. The Chapter 13 Trustee objected. Saldana filed an amended plan, reducing her voluntary monthly contributions to the retirement plan to $484. The Trustee objected again, arguing that Saldana improperly excluded her voluntary retirement plan contributions when calculating her disposable income. Saldana produced information showing that she paid $601 monthly to repay two loans from her retirement account. The loans matured in less than three years. Saldana also produced information showing that she also made a $484 monthly voluntary monthly contribution to the retirement plan. Saldana filed an amended means test that amortized her retirement plan loan repayments over the life of the Chapter 13 plan and excluded the $484 monthly contributions. This left Saldana with a negative disposable monthly income, so unsecured creditors would not receive any distribution. The Trustee again objected. Saldana ultimately filed a third amended plan that eliminated her retirement plan contributions. The bankruptcy court confirmed this third amended plan.
- Judge(s):
- Sidney R. Thomas, Consuelo M. Callahan, and Gabriel P. Sanchez, Circuit Judges
