401(k) Contributions in Chapter 13

One question many people ask is, "can I continue to contribute to a 401(k) plan in Chapter 13."  The answer depends on where you live.  Depending on which federal judicial circuit you live in, contributions to a 401(k) might be allowed or they might not.  Utah is in the Tenth Judicial Circuit.  In the Tenth Circuit ongoing contributions to retirement accounts are not considered necessary living expenses and are therefore not allowed in Chapter 13.  In other words, the amount ordinarily contributed to a 401(k) plan must be diverted to the trustee for the benefit of creditors while one is in Chapter 13.

Separate from ongoing contributions is the question of whether loans from a 401(k) can continue to be repaid in Chapter 13.  In this case, courts are fairly unanimous in holding that repayment of existing loans as opposed to contributions is permissible in Chapter 13.