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Look if Debtors are “Needy” – to Keep Tax Refunds, Give to 401K

An above median income family didn’t include their 401K contributions and tax refunds into their disposable income calculation.  The UST filed a Motion to Dismiss James and Heidi Kehl’s Ch. 7 filing in the Eastern District of MI, Southern Division. 
The UST argued at an evidentiary hearing the ability of the Debtors to pay on their unsecured debt is significant, without this diminishing their present standard of living. 
The UST must establish by a preponderance of the evidence that there is an abuse of the relief provisions of a Ch. 7 for dismissal. 
To determine if there is abuse the Bankruptcy Court must decide if the Debtors are “honest and needy”.  Truthful and undeceptive with (their) creditors is considered honesty.  The view that a debt predicament is to a level which makes liquidation a sensible remedy, defines needy. 
The Court analyzed whether expenses could be significantly reduced without depriving the Debtors of life’s necessities. 
401K contributions are not automatically unreasonable.  They must be examined on a case-by-case basis, the Court previously stated.
The Court reviewed completely whether these contributions were necessary to the maintenance and support of the Debtors here.  Through examining the totality of their circumstances, the conclusion reached was that they were not needy of a Ch. 7 discharge.
When 401K contributions are unnecessary, then the deductible amount needs inclusion in a disposable income determination. 
As a Debtor, because you might need tax refunds for some potential purpose is not a valid argument for keeping them.  The Court found agreement with the UST in this case, “that such should be considered disposable income available to fund a Chapter 13 plan”.
Consideration based on certainties and not possibilities, makes a bankruptcy expense legitimate.