Legal Update: 6th Circuit Court of Appeals Says Debtors in Chapter 13 Bankruptcies Can’t Contribute to 401K or Retirement Plans
Posted on Wednesday, March 26th, 2014 at 3:41 pm
The 6th Cir. Court of Appeals, which covers Kentucky, Ohio, Tennessee, and Michigan, says debtors in Chapter 13 bankruptcies can’t contribute to 401k or retirement plans while they are in bankruptcy.
This Decisions Limits an Individual’s “Fresh Start” Through Bankruptcy
If you are a debtor in a Chapter 13 bankruptcy, this decision is bad for you because it causes you to have a higher payment to the trustee. It also takes away your ability to save for retirement. The whole point of bankruptcy is to get a “fresh start”, and part of getting a fresh start is having the ability to save for retirement.
This Decision Will Effect All Taxpayers Eventually
If you are a taxpayer, this is also a really bad decision. People that haven’t adequately saved for retirement are more likely to take advantage of Medicare, Medicaid, and Social Security for longer periods of time (i.e. before age 67). An increase in the need for these programs will worsen the country’s debt problem and may increase taxes down the line.
What Should Be Done…
We all know that most people don’t save for retirement adequately. The bankruptcy system should force debtors to put money toward their retirement, not prohibit them. Instead of maximizing the amount of money creditors can get, maximize the benefit to all taxpayers in general. Most creditors are multi-billion dollar corporations, and many of them received bailouts during the great recession. There’s no reason the law should continue backstopping their bad lending decisions at the cost of regular people’s future.
It can be tough staying current on bankruptcy law and it is one of the many reasons that Northern Kentucky bankruptcy filers need the services of a skilled bankruptcy lawyer.
“We’ve Got You Covered.” If you live in the Northern Kentucky area, including Boone, Kenton, Campbell, Grant and Gallatin Counties, Lawrence & Associates can help you with your bankruptcy. Call us today for a free consultation!
Contact Us (859.371.5997) for a Free Consultation