Can I contribute to my 401k during my Chapter 13 bankruptcy case?
Question: Can I make voluntary contributions to my 401k or other qualified retirement plan to minimize disposable income in my Chapter 13 bankruptcy case?
Answer: It depends on where you are filing for bankruptcy. Some jurisdictions will allow you to make voluntary contributions to a qualified retirement account during your Chapter 13 bankruptcy case, but many won't.
If You Can Contribute to Your 401k
If your bankruptcy court allows debtors to make voluntary contributions to 401k accounts, then it's often a good idea. The contributions will reduce your projected disposable income calculation on the Chapter 13 means test. This means that more money goes to your retirement and less to your creditors. (Which is why many jurisdictions don't allow voluntary contributions.)
(To learn more about the role of disposable income in Chapter 13 bankruptcy, see Chapter 13 Laws: Your Disposable Income.)