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Another voice in the savings chorus

By Cathy Moran

Pink Piggy BankI am not alone!

A Wisconsin judge allowed Chapter 7 debtors to contribute to retirement savings in the face of a means test challenge claiming savings was an abuse of the bankruptcy system.

Hurray! Another in the small band of those touting savings.

In the Mravik case, the debtor’s Chapter 7 means test, which does not provide for retirement savings as an allowable deduction, said that their case was presumed to be an abuse. The trustee sought dismissal of the case.

No, the judge held. We are not required to dismissed every case that is presumptively abusive.

Congress indicated its support for retirement savings by making them an allowable expense in Chapter 13, he went on. [Someone should tell me why the expense isn’t allowable in Chapter 7, but then, I know how BAPCPA was drafted and by whom.]

In the bankruptcy world before the means test, debtors were expected to pay to creditors in a Chapter 13 every penny over their budgeted expenses. I railed at that on the grounds that 1) life isn’t like that; the unexpected does happen; and 2) the Chapter 13 experience should be building good habits for life after bankruptcy. Spending every penny that comes in the door is not the path to financial rehabilitation.

So, I’m exceedingly pleased to see the tide turning, even a small bit, here.

Image courtesy of SeniorLiving.org

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Filed Under: How bankruptcy works

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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