MEMORANDUM & ORDER AFFIRMING BANKRUPTCY COURT
The question presented in this bankruptcy appeal is whether the Bankruptcy Court erred in holding that pension with-holdings from a Chapter 13 debtor’s salary, required to pay the debtor’s contributions to the New York City Employees’ Retirement System (“NYCERS”) pursuant to elections made by the debtor under Section 613(a) of the New York Retirement and Social Security Law,
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constitute “disposable income” as defined in Section 1325(b)(2) of the Bankruptcy Code, 11 U.S.C. § 1325(b)(2), and as such are necessarily includable in the debtor’s plan to pay outstanding debts and obtain her discharge. I hold, after de novo review,
see,
Fed.R.Bank.P. 8013;
Matter of Fugazy Express, Inc.,
History of the Case
On June 15, 1998, Sharlene De Ann Taylor filed a voluntary Chapter 13 bankruptcy petition. Taylor was employed as a secretary by the New York City Housing Authority, earning $22,790 per annum. She supported two dependents, incurred *39 too many debts, was unable to meet her monthly rent payments, and faced eviction. 2
Chapter 13 of the Bankruptcy Code allows a debtor, like Ms. Taylor, to obtain a discharge by either distributing her assets to creditors, if creditors can be paid in full by that means, or distributing to her creditors all of her “disposable income” expected to be earned over a three year period. In the latter option, the debtor is eligible for discharge even if creditors are not paid in full. Taylor chose this latter option.
The debtor proposed to pay the creditors $250 monthly for three years, contending that this was all of her “disposable income.” The Trustee announced an intention to object on the ground that the debtor had failed to include in her “disposable income” that portion of her salary that was deducted for her pension savings: $134.20 per month for pension contribution to NYCERS and $43.55 as a repayment to NYCERS of a pension loan. The debtor then moved to include those pension contributions in her Chapter 13 Plan (the “Plan”), believing that cessation of contribution payments would enable her to pay her creditors in full. Ex. C. ¶¶ 5-6. The City objected, claiming that the pension contributions and deductions were not “disposable income,” but were statutorily mandated payments.
On July 8, 1999, the Bankruptcy Judge, the Hon. Cornelius Blackshear, ruled that the Debtor’s pension contributions and loan repayments were disposable income and thus required by law to be included in the Plan.
In re Jaiyesimi,
Discussion:
The purpose of Chapter 13 of the Bankruptcy Code is to allow “a debtor to retain all her property and pay unsecured creditors all or a portion of their claims without interest over a three to five-year period. The debtor is entitled to a discharge of claims remaining unpaid upon completion of the plan. The value of total plan payments must be ‘not less than’ the amount that would be paid to unsecured claims if the estate were liquidated under Chapter 7.”
In re Cathleen M. Nation,
Section 1325(b)(1) of the Bankruptcy Code provides that a Bankruptcy Court may approve a plan, only if, as of the effective date of the plan:
(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or
(B) the plan provides that all of the debtor’s projected disposable income to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.
“Disposable income” is defined as “income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debt- or.” 11 U.S.C. § 1325(b)(2)(A).
The issue of this appeal is whether Taylor’s contributions and loan repayments are “reasonably necessary” for her “maintenance or support.” Id. The debtor is expected to make a “substantial effort” *40 to repay creditors, and to incur financial sacrifices.
Chapter 13 relief is essentially equitable, and contemplates a substantial effort by the debtor to pay his debts. Such an effort, by definition, may require some sacrifices by the debtor, and some alteration in the prepetition consumption levels. Thus, the debtor might reasonably be required to devote to the plan that portion of his income which is not necessary for the support of the debtor and his family.
In re Johnson,
Contributions to a pension plan are forced savings from salary — indeed a powerful type of savings because of tax advantages and employer contributions. As a form of savings they cannot be categorized as funds that are “reasonably necessary” for a debtor’s “maintenance or support.”
4
See
11 U.S.C. § 1325(b)(2)(A). The money paid or contributed by the debtor is exclusively for the debtor’s own benefit, and cannot be said to be “reasonably necessary for the maintenance or support of the debtor.”
In re Cathleen M. Nation,
The City argues that Ms. Taylor’s pension contributions and loan repayments are mandatory under New York Law. N.Y. Retire.
&
Soc.Sec.Law §§ 600(b)(1), 604-c(d)(1)(i)(A), 604-c(d)(1)(i)(B), 613; N.Y.C.Admin.Code § 13-104. Ms. Taylor joined NYCERS on November 20, 1995, electing to participate in NYCERS’ irrevocable Twenty Five-Year Early Retirement Program (“55/25 Plan”), N.Y. Retire.
&
Soc.Sec.Law § 604-c.
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Ms. Taylor thus subscribed to a defined benefit plan. The plan required her to buy back missed contributions in order to avoid deficits in contributions that could affect her pension benefits.
In re Jaiyesimi,
The effect of an employee’s inability to make mandatory contributions is not treated in the statute. Although the City has the right to offset amounts owed the plan from salary and other benefits payable to the employee,
see In re Goewey,
A recent decision,
In re Awuku,
Thus, I hold that while payroll deductions may be considered mandatory in the sense that New York Retirement and Social Security Law and NYCERS regulations require deductions from a debtor’s pay regardless of a debtor’s wishes, such action may not be allowed to interfere with the creditors’ “entitlement to receive all of the debtor’s disposable income under Section 1325(b)(l)B.”
Nation,
I am aware of
In re Colon Vazquez,
The Pension Loan Repayments
Taylor’s pension loan repayments is to be understood according to the same analysis as for pension contributions. A debtor’s obligation to repay a retirement loan is not a debt dischargeable in bankruptcy.
In re Villarie,
The issue of loan repayments implicates the same policy considerations that govern pension contributions. Thus, as discussed more fully in the context of pension contributions, if loan repayments were not considered disposable income, courts would “convey a message to debtors contemplating bankruptcy that they may borrow against their retirement funds pre-petition and then insulate the repayment of those monies from their creditors post-petition.”
In re Jones,
Conclusion
The decision of the Bankruptcy Court that the debtor’s pension contributions and loan repayments are part of her disposable income pursuant to 11 U.S.C. § 1325(b) is affirmed. The Clerk shall dismiss the appeal and close the matter.
SO ORDERED.
Notes
. Section 613(a) [Eff. until June 30, 1999J provided:
Members shall contribute three percent of annual wages to the retirement system in which they have membership. The head of each retirement system shall promulgate such regulations as may be necessary and appropriate with respect to the deduction of such contribution from members' wages and for the maintenance of any special fund or funds with respect to amounts so contributed.
. Oral Arg. Trs. of Jan. 4, 2000, at 3, 19.
. Membership in NYCERS is governed by N.Y. Retire. & Soc.Sec.Law § 600 et seq., the New York City Administrative Code, and other rules and regulations. Employees of New York City contribute to the plan, N.Y. Retire. & Soc.Sec.Law § 613, and may borrow from the plan, subject to repayment. See N.Y. Retire. & Soc.Sec.Law § 50(b) and N.Y.C.Admin.Code § B3-28.0.
. Although there is a certain degree of elasticity in determining what is "reasonably necessary ... for the maintenance or support of the debtor,” provisions for savings are not properly included.
Cf. In re Tinneberg,
. Section 604c(d)(l)(i)(B) provides in pertinent part:
each such participant shall contribute an additional two and eighty-five one hun-. dredths percent of his or her compensation earned from all credited service ... rendered on or after the commencement of the first payroll period which begins after January first nineteen hundred and ninety-eight. ...
N.Y. Retire. & Soc.Sec.Law § 604-c(d)(l)(i)(B) (McKinney Supp.1996). Withdrawal from the 55/25 Plan can be effected if initial election was made in error. N.Y. Retire. & Soc.Sec.Law § 604-c(B)(3)(ii)
.Calculation of employer contributions is governed by N.Y.C.Admin.Code § 13-127 and includes contributions by the City and City-related entities.
. See NYCERS Rule 20.
.
In
re
Davis,
.The bankruptcy court in Awuku was concerned "to give sufficient weight to the perspectives of the social sciences, especially modern welfare economics.” Id., at 25.
. The law applicable in Colon provides in part that employees from whose wages deductions are being made "may not dispose of the amounts discounted ... except in the event they definitely cease in their office or employment." 18 Laws of P.R.Ann. § 862(h).
. Adverse consequences resulting from the inclusion of pension benefits in a Chapter 13 Plan as found in Tibbs have simply not been established in this case.
.Corporation Counsel also argued that because pension payments may be treated as employer contributions and not employee income for tax purposes, (I.R.C. § 414(h)), this distinction should hold for what constitutes disposable income in the employee’s Bankruptcy Plan. This argument is unavailing since the question to be determined is one of "reasonably necessity” under the Bankruptcy Code rather than the tax consequences to NYCERS.