Kentucky consumers who are considering filing for Chapter 13 bankruptcy might be interested to learn that one couple’s payment plan was rejected because too large a proportion of the plan was for the couple’s retirement account. A Louisiana judge decided that the percentage in a payment plan that should go toward retirement is 3 percent although there might be exceptions to the amount in some cases.
The payment plan proposed a total of 18 percent toward the retirement account. Part of this was paying back a loan on a 401(k) and the other part was regular retirement investments. While the court allowed that continuing to save for retirement was a good decision, it also said there needed to be a cap on what that investment could be.
Neither creditors nor the Chapter 13 trustee objected to the plan, but the court argued that based on the debtor’s testimony, their payment plan was not made in good faith. The court said that a plan should balance the debtor’s desire to continue saving for retirement with payments to creditors.
Chapter 13 bankruptcy allows individuals who are filing for bankruptcy to work out a payment plan over a period of 3 to 5 years so they can keep some of their assets. In a Chapter 7 bankruptcy, some assets are also considered to be exempt from liquidation. People who are considering bankruptcy might want to talk to an attorney about their options and which type of bankruptcy might be best in their situation. One of the criteria for deciding which type of bankruptcy an individual or couple is eligible for is income. .