In re: Barron D. Parks and Linda R. Parks, 475 B.R. 703

Barron D. Parks and Linda R. Parks filed a chapter 13 petition on January 14, 2011 as above-median debtors, and each contributed about $318 monthly to their 401(k) plans prepetition.
On Official Form 22C they deducted $318 monthly for voluntary postpetition 401(k) contributions, showing a negative line 59 disposable income of -$40.04.
Debtors filed their initial plan January 28, 2011 and first amended plan February 28, 2011 proposing $475.03 monthly payments for 60 months.
The Chapter 13 trustee objected to ongoing postpetition 401(k) deductions as part of disposable income under § 1325(b)(2), citing In re Prigge (Bankr. D. Mont. 2010).
The bankruptcy court sustained the trustee’s objection and denied confirmation of the first amended plan; debtors appealed the denial.
The panel addressed whether § 541(b)(7)(A) excludes postpetition 401(k) contributions from property of the estate and from disposable income in chapter 13.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does § 541(b)(7)(A) exclude postpetition 401(k) contributions from disposable income?	Parks contends postpetition contributions should be excluded.	Drummond argues only prepetition contributions are excluded under § 541(b)(7)(A).	Postpetition contributions are not excluded from disposable income.

In re Prigge, 441 B.R. 667 (Bankr. D. Mont. 2010) (postpetition 401(k) contributions not excluded from disposable income)
In re Seafort, 669 F.3d 662 (6th Cir. 2012) (means test and estate exclusions; postpetition contributions not excluded from disposable income)
In re McCullers, 451 B.R. 498 (Bankr. N.D. Cal. 2011) (postpetition contributions not excluded from disposable income)
In re Egebjerg, 574 F.3d 1045 (9th Cir. 2009) (IRS guidelines; 401(k) contributions not a necessary expense)
In re Johnson, 346 B.R. 256 (Bankr. S.D. Ga. 2006) (statutory interpretation of § 541(b)(7) in context of retirement contributions)