Seafort v. Burden (In re Seafort)

Citation:
___ F.3d ___ (2012 WL 469723) (6th Cir. Feb. 15, 2012)
Tag(s):
Ruling:
Postpetition income of Chapter 13 debtors that becomes available after 401(k) loans are fully repaid is projected disposable income that must be turned over to trustee for distribution to creditors pursuant to Section 1325(b)(1)(B) rather than used to fund voluntary 401(k) plans. Court suggests in dictum that no volluntary postpetition 401(k) contributions can be excluded from projected disposable income, even if similar contributions were being made at the time of the bankruptcy filing.
Procedural context:
Bankruptcy court for the E.D. Ky. held that contributions to 401(k) plan from postpetition income that becomes available after repayment in full of 401(k) loans are excluded from projected disposable income. Sixth Circuit BAP reversed, holding that exclulsion applies only when debtor is contributing to 401(k) plan as of the commencement of the bankruptcy case. Debtors appealed. Sixth Circuit affirmed.
Facts:
Chapter 13 debtors were eligible to participate in their employers' 401(k) retirement plans. At the time of the bankruptcy filing, they were not making any contributions to the plans but were instead in the process of repaying 401(k) loans. Under their plans, debtors proposed to repay those 401(k) loans in full before completion of the plans, and then use the income no longer needed for repayment of the loans to make voluntary contributions to the 401(k) plans. The trustee objected to confirmation of the plans on the grounds that the postpetition income not required for repayment of the 401(k) loans was projected disposable income which was required to be devoted to paying unsecured creditors.
Judge(s):
Suhrheinrich, Gibbons and McKeague

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