Sixth Circuit Opinion on 401(k) Contributions; Update on Zoom 341 Meetings

Sixth Circuit Opinion on 401(k) Contributions:

The Sixth Circuit ruled that a debtor can exclude 401(k) retirement contributions from disposable income where the debtor has been making those contributions prepetition.  In re Davis, No. 19-3117 (6th Cir., slip op June 1, 2020).

The Court did not decide whether the amount that can be excluded is the average of contributions made in the six months prior to bankruptcy, or if it is the amount of contributions the debtor made “on a consistent basis pre-petition.”

The Court did say that the good-faith test still applies “to minimize the risk that a debtor contemplating bankruptcy might begin making 401(k) contributions prior to filing to lower the amount she must ultimately repay to her creditors.”  Id. at 15.

The Sixth Circuit’s opinion supports the position I have taken since BAPCPA was enacted.  I generally permit debtors to continue making contributions to retirement accounts as long as the amounts are reasonable and contributions have been regularly made prepetition.

Keep in mind that we have avoided the strict application of the “means test” calculation of a debtor’s projected disposable income in the EDKY because the debtors’ bar and I generally work together to determine what a debtor in each case can reasonably afford to pay to creditors using Schedules I and J.  I think our approach works well.

As long as the maxim “pigs get fat, hogs get slaughtered” is followed, I expect there will be no changes in my policy on 401(k) contributions or our way of determining disposable income.

Update on Zoom 341 Meetings:

The U.S. Trustee’s authorization to conduct 341 meetings via telephone or Zoom presently extends only to cases filed through July 10, 2020.

We have held 341 meetings via Zoom in the last two months in more than 80% of our cases.  When meetings have been continued, the reasons are mostly the same as for in-person meetings – schedule conflict; illness; lack of document production; “I forgot”; etc.  Only a handful have been rescheduled because of the inability of a debtor or attorney to connect via Zoom.

I would like to continue conducting section 341 meetings by videoconferencing.  I think it is more efficient for all parties; less expensive; and provides the greatest level of security and safety possible.  What do you think?  Let me know by posting a comment or sending me an email.

I have been asking debtors to show their ID and proof of SSN on camera.  I am now asking that debtors’ attorneys make a copy of those documents in advance (most of you do anyway) and upload a PDF copy to my document portal.  We can more quickly verify the information if we have it in advance.  After the 341 meeting is held, those documents will be securely deleted from my system.

 

15 comments

  1. I really like the zoom format esp due to reduction of travel time. Regardless of what division I file, I am at least an hour drive to the federal courthouse — which also means most of my clients have the same loss of productivity. When we are trying to help people better manage money, to then tell them they will lose a day of work to attend Court seems counterintuitive. Thanks for listening!

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  2. The 341s conducted via Zoom have worked well and I hope that the practice will continue for the majority of cases. It is more cost effective for the debtor/estate in a fee app case and more efficient for the attorney in a no-look case. Even more importantly, it allows for the debtor to schedule a shorter window of time to be available allowing them to miss less work, not need to obtain childcare, etc. for this hearing.

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    1. I have found that the Zoom meetings work quite well for my clients. The only adjustment that I wouldn’t mind seeing is some means to acknowledge how far behind the meetings are running, whether that be an e-mail or a text to a cell, as I’ve had clients panic and call the office line when they’ve sat in the “waiting” room for a good bit after their scheduled time, but am unable to tell them anything but “just wait and it will open up when it’s our turn” so to speak.

      Outside of that, I feel that the zoom meetings have been very successful and save on scheduling extended time off of work for the clients to get to the courthouse, etc.

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  3. I could not agree more that Zoom has improved the efficiency of 341 meetings and my practice. I think it’s been a wonderful change – a silver lining in the cloud of the pandemic. All of my clients’ comments have been positive as well. I think the Zoom conferences are superior to the telephonic conferences we are having in Ch. 7s because there’s less room for confusion with fewer people in the meeting and fewer unexplained silences causing concern that a line has been dropped. Honestly, I’ve been crossing my fingers and hoping you wanted to keep Zoom going.

    I’ll echo Aaron Huff’s comments about finding a way to know if meetings are running behind. I only had that happen once, but the knowledge gap did make for a memorable experience.

    One more suggestion: it would be useful if counsel could screen share. Sometimes if a document doesn’t scan well or doesn’t get uploaded, I can provide it on screen and avoid the staff attorney having to come back to the case later on. That’s not a must-have, though. Zoom is the most attractive option even without it.

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  4. I find the zoom hearings to be a much better experience. I try to warn clients ahead of time that meetings may run late and they may have to wait on the line for a while. I love that I am able to work on other matters between hearings without having to spend the day or afternoon waiting between hearing. There was some initial adjustment to making sure that clients understood the process and what they needed but I now tell almost all of them the same thing and the hearings seem to run smoothly. And I wholeheartedly agree with an earlier comment about debtors not having to miss work or find child care.

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