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.