Bankruptcy: Debtor can contribute for Retirement in Chapter 13 Case

     In the case of In re: Ricardo Cantu, Jr., the United States Bankruptcy Court at Alexandria ruled that a debtor in a Chapter 13 case can contribute for retirement under 11 U.S.C. Section 541 (b)(7).
     In Cantu the Chapter 13 trustee objected to the debtor making voluntary retirement contributions. The Court, in its review, noted that the issue of voluntary contributions has been the subject of some debate in the case law in recent years. The Court stated that there are essentially three divergent lines of cases. The first line holds that the debtor is not entitled to any deduction for voluntary contributions, whether or not he was making voluntary contributions pre-petition. The second line is that voluntary retirement contributions may be continued as long as they are consistent with the debtor’s pre-petition history of contributions. The third line, which the Court noted was the majority view, concludes that the bankruptcy code allows for the deduction, whether or not the debtor was making voluntary contributions prior to the bankruptcy filing, but subject to a determination of the debtor’s good faith.
     The Court noted that the bankruptcy trustee urged the Court to adopt the second line of cases, but the Court adopted the third, deciding that the bankruptcy code does not limit the debtor’s ability to make contributions post-petition, nor is there any distinction between pre-petition contributions and post-petition contributions. The Court held that the use of the term “any amount”, without limitations, followed by the term “contributions”, compelled the conclusion that Congress meant no such distinction.
     The Court further decided that there was no evidence that the debtor proceeded in anything other than good faith. Accordingly, the Court overruled the Chapter 13 trustee’s objection.