Repayment of 401 (k) Loan is Not Disposable Income Under Chapter 13 Bankruptcy Plan, But Creditors May be Entitled to Step Up Plan
In a letter opinion dated June 14, 2010, the Bankruptcy Court confirmed that under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) a debtor is not required to contribute money to a Chapter 13 Plan that is presently being used to repay a loan borrowed against a 401(k) plan. However, a creditor(s) challenging the confirmation of the plan may (1) inquire as to the terms of repayment and (2) the debtor may be required to propose a plan that steps up payment at a later date.