In re Vanlandingham
516 B.R. 628
Bankr. D. Kan.2014Background
- Chapter 13 debtor Vanlandingham filed for Chapter 13 with an above-median income and proposed plans to pay unsecured creditors from projected disposable income.
- She began contributing to a 401(k) post-petition via payroll withholding; prepetition enrollment existed, but actual contributions started after filing.
- Form 22C Line 55 deducted $151.67 monthly (about 4%) as a 401(k) contribution, yielding negative disposable income and no unsecured payout.
- Trustee objected to confirmation, arguing 541(b)(7) safe harbor applies only to prepetition contributions and excludes post-petition contributions from disposable income.
- Amended plan proposed feasible payments; the trustee again objected to excluding 401(k) contributions from disposable income.
- Judge Nugent ultimately held that post-petition 401(k) contributions may be excluded from disposable income under 541(b)(7) and confirmed the plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post-petition 401(k) contributions are excluded from disposable income | Trustee: safe harbor limited to prepetition contributions | Vanlandingham: 541(b)(7) applies to all withholdings; post-petition included | Yes; post-petition contributions excluded |
| Proper statutory interpretation of 541(b)(7) with 1306 and Lanning | Johnson-like view; exclusion applies regardless of petition date | Opposing views (Seafort/Prigge) restrict post-petition exclusions | Johnson view adopted; exclusion applies to post-petition withholdings |
| Impact on good faith and plan feasibility | Debtor acted in good faith, modest 4% contribution | Risk of abuse if large post-petition changes allowed | Good faith not endangered; plan confirmed with feasibility |
Key Cases Cited
- In re Johnson, 346 B.R. 263 (Bankr. D. Mass. 2006) (post-petition retirement contributions excluded from disposable income per 541(b)(7))
- In re Drapeau, 485 B.R. 29 (Bankr. D. Mass. 2013) (post-petition contributions excluded; supports Johnson line)
- Seafort v. Burden (In re Seafort), 669 F.3d 662 (6th Cir. 2012) (post-petition retirement contributions may be excluded; competing views exist)
- In re Prigge, 441 B.R. 667 (Bankr. D. Mont. 2010) (rejects post-petition contributions as disposable income; supports different view)
- In re Parks, 475 B.R. 703 (9th Cir. BAP 2012) (post-petition contributions not deductible for disposable income)
- In re Devilliers, 358 B.R. 849 (Bankr. E.D. La. 2007) (retirement contributions excluded from disposable income; aligns with Johnson)
- In re Melander, 506 B.R. 855 (Bankr. D. Minn. 2014) (post-petition retirement contributions protected as not disposable income)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (forward-looking approach to projected disposable income; supports excluding known post-petition contributions)