disposable income

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Supreme Court Declines to Hear Trustee’s Appeal in Saldana—Victory for Chapter 13 Debtors and Retirement Security

On June 23, 2025, the U.S. Supreme Court denied the Chapter 13 trustee’s petition for certiorari in Bronitsky v. Saldana, leaving intact a significant Ninth Circuit decision that protects the ability of debtors to continue contributing to retirement accounts while repaying unsecured creditors through a Chapter 13 plan.

The Court’s denial is a quiet but consequential win for consumer debtors—and a reaffirmation that long-term financial stability, including retirement savings, has a place within bankruptcy’s rehabilitative structure.

[Read more…] about Supreme Court Declines to Hear Trustee’s Appeal in Saldana—Victory for Chapter 13 Debtors and Retirement Security

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Can Debtors Prioritize Retirement Over Creditors? Trustee Seeks Supreme Court Review in In re Saldana

In a move that could have sweeping implications for Chapter 13 bankruptcy cases nationwide, Martha G. Bronitsky, the Chapter 13 Trustee, has filed a petition for certiorari with the Supreme Court in In re Saldana. The case centers on whether voluntary contributions to retirement accounts should be excluded from a debtor’s disposable income calculation. The Ninth Circuit’s decision in In re Saldana sided with the debtor, holding that voluntary retirement contributions are shielded from creditors, a ruling that some argue disrupts the balance between debtor protections and creditor rights under the Bankruptcy Code. Now, the Supreme Court is being asked to step in, potentially impacting thousands of Chapter 13 cases filed each year.

[Read more…] about Can Debtors Prioritize Retirement Over Creditors? Trustee Seeks Supreme Court Review in In re Saldana

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Ninth Circuit Clarifies Disposable Income Exclusions for Chapter 13 Debtors Concerning Voluntary Contributions to Retirement Plans

Facts

Jorden Marie Saldana, a surgical technician earning approximately $101,776 annually, filed for Chapter 13 bankruptcy to reorganize her finances and address over $64,000 in unpaid taxes and unsecured debts. In calculating her disposable income, Saldana excluded $747 per month in voluntary contributions to her employer-managed retirement plan.

The Chapter 13 trustee objected, arguing that voluntary retirement contributions constitute disposable income under the Bankruptcy Code and must be applied to repay creditors. The bankruptcy court agreed, sustaining the trustee’s objection and requiring Saldana to adjust her Chapter 13 plan. Saldana appealed to the district court, which affirmed the bankruptcy court’s decision. Saldana then appealed to the Ninth Circuit.

Analysis

The Ninth Circuit reversed the lower courts, holding that voluntary contributions to employer-managed retirement plans are excluded from disposable income under Chapter 13. The court relied on the “hanging paragraph” in 11 U.S.C. § 541(b)(7), which explicitly states that such contributions “shall not constitute disposable income as defined in section 1325(b)(2).”

The Ninth Circuit emphasized that the statutory language is unambiguous, allowing Chapter 13 debtors to exclude any amount of voluntary contributions to qualified retirement plans from their disposable income calculations. This interpretation aligns with Congress’s intent in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, which sought to protect retirement savings while encouraging Chapter 13 reorganizations.

The court rejected alternative interpretations that would limit the exclusion to pre-petition contributions or cap it based on historical contribution levels. It also dismissed concerns about debtor abuse, noting that Chapter 13’s good faith requirements and other safeguards adequately address potential misuse of the exclusion.

Conclusion

The Ninth Circuit’s decision in In re Saldana reinforces the broad protections for retirement contributions in Chapter 13 bankruptcy cases. By excluding voluntary contributions from disposable income, the ruling encourages debtors to maintain long-term financial stability while reorganizing their debts.

NCBRC and NACBA filed an amici brief in support of the debtor

In re Saldana – 9th Circuit

Amici Curiae Brief of NCBRC-NACBA

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9th Circuit to Address Whether a Debtor May Deduct Voluntary Retirement Deductions to Determine Disposable Income

The Ninth Circuit Court of Appeals has agreed to hear an appeal whether the bankruptcy court erred in ruling that a Chapter 13 debtor, in calculating projected disposable income, is not permitted to deduct the amount of voluntary retirement plan contributions even where the debtor was making the contributions prepetition. The debtor’s appeal from adverse decisions below.

APPELLANTS OPENING BRIEF

BRIEF OF AMICI CURIAE NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS AND NATIONAL CONSUMER BANKRUPTCY RIGHTS CENTER

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Local Standards Apply but Trustee Need Not Be a Sumpsimus

Despite higher actual vehicle operating costs, when calculating disposable income on the means test, above-median debtors must use the exact numerical values for expenses that are specified in the IRS’s National and Local Standards. Rodriguez v. Bronitsky (In re Rodriguez), No. 20-1085 (B.A.P. 9th Cir. Oct. 16, 2020). [Read more…] about Local Standards Apply but Trustee Need Not Be a Sumpsimus

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6th Circuit Clarifies Treatment of 401(k) Contributions in Chapter 13

Rejecting its own dictum in  Seafort v. Burden (In re Seafort), the Sixth Circuit held that a chapter 13 debtor’s post-petition voluntary contributions to an employer-sponsored retirement plan are not part of her disposable income so long as they are a continuation of pre-petition contributions. Davis v. Helbling (In re Davis), No. 19-3117 (6th Cir. June 1, 2020).

Well before she filed for bankruptcy, the debtor began making monthly contributions in the amount of $220.66 to her retirement account. When she filed for bankruptcy, she included those contributions in her schedule of expenses. The trustee objected to confirmation of the debtor’s proposed chapter 13 plan on the basis that, because of the monthly contributions to her 401(k), she was not proposing to contribute all of her disposable income to the plan. Adhering to dictum in Seafort v. Burden (In re Seafort), 669 F.3d 662, 674 n.7 (6th Cir. 2012), the bankruptcy court sustained the trustee’s objection. The debtor amended her plan to incorporate the 401(k) amount, and the bankruptcy court certified the case for direct appeal to the Sixth Circuit. [Read more…] about 6th Circuit Clarifies Treatment of 401(k) Contributions in Chapter 13

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Voluntary 401k Contributions Not Excluded from Disposable Income

A Chapter 13 debtor’s voluntary post-petition contributions to his 401k plan must be included in the calculation of disposable income under section 1325. Penfound v. Ruskin, No. 18-13333 (E.D. Mich. Sept. 20, 2019).

Above-median Debtor, John Penfound, worked continuously for twenty-four years during which time he made regular voluntary contributions to his 401k plans. When he and his wife, Jill Penfound, filed a petition for Chapter 13 bankruptcy, he sought to continue contributing $1,375/month to his 401k and exclude those amounts from his calculation of disposable income. Upon objection by the trustee, the bankruptcy court ordered the debtors to amend their proposed plan based on a re-calculation of disposable income including the monthly contributions to the 401k plan. The debtors appealed confirmation of the amended plan.

Relying on reasoning and dictum in In re Seafort, 669 F.2d 662 (6th Cir. 2012), the district court affirmed. [Read more…] about Voluntary 401k Contributions Not Excluded from Disposable Income

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Court Rejects Nonstandard Provision for Retention of Tax Refund

The Chapter 13 debtor was not permitted to include a nonstandard plan provision to retain her tax refund where the refund was not reasonably necessary for the support of the debtor or her dependents. Penn v. Viegelahn, 2018 WL 5984844, No. 18-354 (W.D. Tex. Nov. 13, 2018). [Read more…] about Court Rejects Nonstandard Provision for Retention of Tax Refund