Monroe, MI asked in Bankruptcy for Michigan

Q: Can i keep my mandatory contributions made into a 457b after seperation of employment while in ch 13 in michigan?

Husband had a 457b with mandatory contributions. Is leaving that job to another firefighter job that has a 345 pension. We will be getting the money that he contributed into the 457b. Are we able to pay off things? Or end the ch 13 if we chose?

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2 Lawyer Answers
Lloyd M. Nolan
Lloyd M. Nolan
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Chesterfield, MO

A: I cannot speak definitively as to what happens in Michigan since I am not licensed in that State. However, I will assume that it is likely similar to the way that we handle these matters in Missouri. You wrote that you "will be getting the money" that your husband contributed to his 457b plan. In our jurisdiction, when a Chapter 13 debtor receives a large distribution such as this, the debtor is required to pay most, sometimes all, into his or her Chapter 13 plan, thereby increasing the plan base. The rationale is that the debtor is required to use his or her "best efforts" to pay back his or her creditors during the life of the Chapter 13 plan. If the debtor(s) have a sudden influx of cash, they then have a greater ability to pay back their creditors. What I advise clients is that this may allow them to pay off their Chapter 13 plan early, if the time for claims has passed and there are adequate funds to pay all creditor claims in full. This results in an earlier discharge date. Alternatively, the debtors may choose to dismiss their Chapter 13 (which can be done since Chapter 13 is voluntary) and deal with their creditors outside of bankruptcy. The latter solution is often preferable where the distribution would not be sufficient to pay claims in full. This is a tricky situation and should consult with your local Chapter 13 attorney as soon as possible, and before taking any distributions.

Timothy Denison
Timothy Denison
Answered
  • Bankruptcy Lawyer
  • Louisville, KY

A: You can use this to pay off your Chapter 13. You n min at also want to dismiss your Chapter 13 depending on how much you will be receiving. Your bankruptcy lawyer can help you decide what is best for you to do.

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