UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

Alexandria Division

In re: )

)

RICARDO CANTU, JR., ) Case No. 15-14556-BFK

) Chapter 13

Debtor. )

MEMORANDUM OPINION 

This case comes before the Court on: (a) the Chapter 13 Trustee’s Objections to the 

Debtor’s claim of exemptions (Amended Schedule C); and (b) the Chapter 13 Trustee’s 

Objections to the Debtor’s Amended Plan. The Court sustains the Trustee’s Objections to the 

Debtor’s claim of exemptions and overrules the Trustee’s Objections to the Debtor’s Amended 

Plan.

Findings of Fact 

The following facts are not genuinely in dispute: 

A. The Debtor’s Bankruptcy Filing and His Initial Chapter 13 Plan. 

1. The Debtor filed a Voluntary Petition under Chapter 13 with this Court on 

December 31, 2015. Docket No. 1. His income is above-median. Docket No. 10 (Official Forms 

122C-1, 122C-2). 

2. The Debtor filed his initial Chapter 13 Plan on January 14, 2016. Docket No. 11. 

The Debtor attached a copy of his Schedule I to the Plan, under which he deducted $0.00 for 

voluntary contributions to a retirement plan, and $338.37 for required repayments on two 

retirement fund loans. Id. at Schedule I, Lines 5c, 5d. 

3. The Debtor’s initial Chapter 13 Plan was denied confirmation. Docket No. 20.

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B. The Debtor’s Amended Chapter 13 Plan. 

4. On March 31, 2016, the Debtor filed an Amended Chapter 13 Plan. Docket No. 

22. The Amended Plan called for payments of $1,250.00 per month for 6 months and then 

$810.00 per month for 54 months, for total plan funding of $51,240.00. Id. at ¶ 1. This, 

according to the Amended Plan, will result in a distribution to unsecured creditors of 

approximately 13% of their allowed claims. Id. at ¶ 4. 

5. At the same time, the Debtor filed Amended Schedules B and C. Docket No. 23. 

In his Amended Schedule B, the Debtor identified $804.00 in “future income from 1/21/2016 –

5/11/2016 from a retirement loan being paid off on 1/20/2016.” Id. at Amended Schedule B, ¶ 

16. In his Amended Schedule C, the Debtor claimed this $804.00 as exempt pursuant to Va. 

Code § 34-4, Virginia’s wildcard exemption statute. Id. at Schedule C, ¶ 2; see also Va. Code 

Ann. § 34-4 (West 2016).

1

6. One of the Debtor’s retirement fund loans was paid in full in January 2016. 

Accordingly, the Debtor attached an Amended Schedule I to his Amended Plan, under which the 

Debtor indicated that he will pay $268.62 per month as a voluntary contribution to his retirement 

plan, and will continue to pay $69.75 in required repayments on the other retirement fund loan. 

Docket No. 22, Schedule I, Lines 5c and 5d. 

7. The Trustee filed an Objection to confirmation of the Debtor’s Amended Chapter 

13 Plan, on the grounds of good faith and disposable income. Docket No. 24. 

8. The Trustee also filed an Objection to the Debtor’s Amended Schedule C. Docket 

No. 25. 

 1 Virginia is an opt-out state. Va. Code Ann. § 34-3.1 (West 2016). Debtors, therefore, are only allowed the 

exemptions afforded by the Virginia Code and may not claim the federal exemptions set out in the Bankruptcy 

Code. 11 U.S.C. § 522(b)(2), (3). 

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C. The May 12, 2016, Hearing. 

9. The Court held a hearing on May 12, 2016. At the hearing, Debtor’s counsel 

argued that the Debtor was entitled to exempt the income represented by the savings in not 

having to pay his retirement fund loan under either Va. Code § 34-29 (which allows an 

exemption from garnishment of 75% of wages for non-support debts) or Va. Code § 34-4 (the 

wildcard exemption, which allows an exemption of up to $5,000 in value - $10,000 for those 

over 65 – plus $500 for each dependent). See Va. Code Ann. § 34-29 (West 2016); Va. Code 

Ann. § 34-4 (West 2016).2

10. Debtor’s counsel represented to the Court that the Debtor’s employer refused to 

allow him to make voluntary contributions to his retirement plan because he had taken out two 

hardship loans under the same plan. Debtor’s counsel also represented that the proposed $268.62 

per month in voluntary contributions were about one-third of what the Debtor legally would be 

entitled to contribute to his retirement plan, outside of bankruptcy. These representations were 

not challenged by the Chapter 13 Trustee, and the Court accepts them. 

11. The Court ruled from the bench that it would sustain the Trustee’s Objection to 

the Debtor’s claim of exemption under Va. Code § 34-29, on the ground that such a claim of 

exemption was inconsistent with Bankruptcy Code § 1306(a)(2), which defines property of the 

estate to include “earnings from services performed by the debtor after the commencement of the 

case.” 11 U.S.C. § 1306; Docket No. 29 (Order Sustaining Trustee’s Objection in Part). The 

Court took under advisement: (a) the Trustee’s Objection to the Debtor’s claim of exemption 

 2 As noted above, the Debtor only claimed an exemption under Va. Code § 34-4 for the Debtor’s wages. The Court 

allowed Debtor’s counsel to argue in the alternative that the wages were exempt under Va. Code § 34-29 because 

the Debtor can amend his exemptions at any time. Fed. R. Bankr. P. 1009(a). 

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under Va. Code § 34-4; and (b) the Trustee’s Objection to confirmation of the Debtor’s 

Amended Plan. Id.

Conclusions of Law 

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Order of 

Reference entered by the District Court for this District on August 15, 1984. This is a core 

proceeding under 28 U.S.C. §§ 157(b)(2)(B) (“allowance or disallowance of . . . exemptions 

from property of the estate”), and (L) (confirmation of plans). 

I. The Debtor’s Claim of Exemption in Post-Petition Income. 

Section 1306(a)(2) provides that property of the estate includes, in addition to the 

property specified in Section 541, “earnings from services performed by the debtor after the 

commencement of the case . . . ” 11 U.S.C. § 1306(a)(2). Section 1325(b) of the Code requires 

that, if the trustee or the holder of an allowed unsecured claim objects, the Debtor must either 

pay all allowed claims in full or the plan must provide that “all of the debtor’s projected 

disposable income” be devoted to the Debtor’s Chapter 13 Plan. 11 U.S.C. § 1325(b)(1)(B). For 

above-median debtors, the debtor’s disposable income is measured by the means test contained 

in Sections 1325(b)(2) and (3), and 707(b) of the Code. 11 U.S.C. §§ 1325(b)(2)-(3), 707(b). 

Section 101(10A) of the Code defines the debtor’s current monthly income as “the average 

monthly income from all sources that the debtor receives” during the six months preceding the 

filing, with certain exclusions and adjustments not relevant here. 11 U.S.C. § 101(10A)

(emphasis added). 

The Trustee argues that the Debtor’s claim of exemption under Va. Code § 34-4 cannot 

be allowed because the Debtor had not yet earned the income as of the date of the petition. This, 

however, is not a bar to a claim of exemptions. In re Walz, 546 B.R. 836, 840 (Bankr. D. Minn. 

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2016) (allowing exemption in post-petition inheritance; “the Code does not limit exemptions to 

property owned by the debtor as of the petition date”); In re Walley, 525 B.R. 320, 325 (Bankr. 

E.D. Va. 2015) (“There is nothing in the language of §§ 1306 or 541 to suggest that Congress 

intended to limit an individual’s exemptions to only that property of the estate owned at the 

commencement of the case and to deny the debtor the opportunity to assert any remaining 

allowed exemptions in property of the estate acquired after the bankruptcy filing.”) 

Rather, the Debtor’s claim of exemption cannot be allowed under Va. Code § 34-4 for the 

same reason that the Court denied the Debtor’s claim of exemption under Va. Code § 34-29 – a 

claim of exemption in post-petition wages is fundamentally inconsistent with the structure of 

Chapter 13, which requires a debtor to devote all of his or her disposable income to the Chapter 

13 Plan, subject only to certain statutory exceptions. See Mort Ranta v. Gorman, 721 F.3d 241, 

250-51 (4th Cir. 2013) (recognizing statutory exemption for social security benefits under 11 

U.S.C. § 101(10A)).3 Other than statutorily excluded income or benefits, however, the courts 

have consistently held that income that might be exempt under non-bankruptcy law must be 

included in the Debtor’s Chapter 13 plan. Blausey v. U.S. Trustee, 552 F.3d 1124 (9th Cir. 2009) 

(current monthly income includes disability insurance benefits even if they are excludable from 

gross income by the Internal Revenue Code); Taylor v. United States (In re Taylor), 212 F.3d 

395, 397 (8th Cir. 2000) (affirming dismissal for substantial abuse; “[t]he fact that a pension is 

exempt from the reach of creditors does not preclude a bankruptcy court from finding that the 

pension is also disposable income for purposes of Chapter 13”); In re Matthews, No. 13-10521-

 3 The portion of the Fourth Circuit’s holding in Mort Ranta that denial of confirmation of a Chapter 13 plan is a 

final, appealable order has been effectively overruled in Bullard v. Blue Hills Bank, 135 S.Ct. 1686 (2015). The 

holding in Mort Ranta that social security benefits are excluded from the definition of disposable income remains 

good law. 

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BFK, 2013 WL 1385221, at *9-10 (Bankr. E.D. Va. April 3, 2013) (finding bad faith for debtor’s 

failure to include rental income from tenants by the entireties property on Schedules I and J); In 

re Andrade, No. 10-10444, 2011 WL 1559241, at *2 (Bankr. D. R.I. Mar. 16, 2011) (“most 

courts addressing this issue are saying that exempt property should be included as disposable 

income”); In re Briggs, 440 B.R. 490 (Bankr. N.D. Ohio 2010) (current monthly income includes 

exempt pension income); In re Wyatt, No. 08-1479-SSM, 2008 WL 4572506, at *1-2 (Bankr.

E.D. Va. Oct. 10, 2008) (current monthly income includes Veterans Administration disability 

pay); In re Myles, No. 05-92125-MHM, 2006 WL 6591834, at *1 (Bankr. N.D. Ga. Mar. 9, 

2006) (current monthly income includes projected tax refunds); In re Minor, 177 B.R. 576 

(Bankr. E.D. Tenn. 1995) (worker’s compensation included in disposable income); In re 

Tolliver, 257 B.R. 98 (Bankr. M.D. Fla. 2000) (proceeds of a worker's compensation settlement

included in disposable income).

Any claim of exemption for post-petition wages – whether under the Virginia wage 

exemption statute (Va. Code § 34-29) or under the Virginia wildcard exemption statute (Va. 

Code § 34-4) – is fundamentally inconsistent with the requirement that the debtor devote all of 

his or her disposable income to the Chapter 13 plan. See Perez v. Campbell, 402 U.S. 637, 652 

(1971) (the “controlling principle” is that “any state legislation which frustrates the full 

effectiveness of federal law is rendered invalid by the Supremacy Clause.”)

The Court will sustain the Trustee’s Objection to the Debtor’s Amended Schedule C 

insofar as the Debtor claims an exemption in his post-petition wages. 

II. The Trustee’s Disposable Income and Good Faith Objections.

The second question presented is whether the Debtor is entitled to make voluntary 

contributions to his retirement plan, now that he has completed the payments on one of his 

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retirement plan loans, where the voluntary contributions will be in the same monthly amount as 

his former loan payments. More specifically, the questions are: (a) whether the Debtor’s 

voluntary retirement contributions may be deducted from his disposable income for purposes of 

the disposable income test under Bankruptcy Code Section 1325(b); and (b) whether such 

deductions are made in good faith. The Court concludes that Section 541(b)(7) of the Code 

allows the Debtor to deduct voluntary retirement plan contributions from his disposable income, 

and that the Debtor is proceeding in good faith. 

Section 541 of the Bankruptcy Code defines property of the estate for all Chapters. In 

addition, under Chapter 13 unlike in Chapter 7, the Debtor’s post-petition wages and 

compensation are included in property of the estate. 11 U.S.C. § 1306(a)(2) (“Property of the 

estate includes, in addition to the property specified in section 541 of this title . . . ”) As stated by 

the Fourth Circuit: 

Congress has harmonized these two statutes for us. With Section 541, Congress 

established a general definition for bankruptcy estates. With Section 1306, it then 

expanded on that definition specifically for purposes of Chapter 13 cases. Thus, 

“Section 1306 broadens the definition of property of the estate for chapter 13 

purposes to include all property acquired and all earnings from services 

performed by the debtor after the commencement of the case.” S.Rep. No. 95–

989, at 140–41 (1978).

Carroll v. Logan, 735 F.3d 147, 150 (4th Cir. 2013). 

Bankruptcy Code Section 1325(b) requires that the debtor either pay all unsecured claims 

in full or devote all of his or her disposable income to the plan. Section 1325(b)(3) requires, for 

above-median debtors, that the Court look to the means test of Section 707(b). 11 U.S.C. § 

1325(b)(3). Section 707(b), in turn refers to the debtor’s “current monthly income,” which is a 

defined term in the Code. 11 U.S.C. § 707(b). Section 101(10A) defines “current monthly 

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income” as “the average monthly income from all sources that the debtor receives” during the six

months preceding the filing. 11 U.S.C. § 101(10A).4

In 2005, Congress added to the Code two provisions of relevance here. First, Congress 

enacted Section 1322(f), which excludes from the disposable income calculus any amounts 

required to pay loans to a qualified retirement plan. 11 U.S.C. § 1322(f). The Trustee does not 

contest that any retirement plan loan repayments that the Debtor is required to make post-petition 

are excluded from the calculation of the Debtor’s monthly disposable income. 

Second, Congress added Section 541(b)(7), which excludes from property of the estate: 

(7) any amount—

(A) withheld by an employer from the wages of employees for payment as 

contributions—

(i) to—

(I) an employee benefit plan that is subject to title I of the Employee Retirement 

 Income Security Act of 1974 or under an employee benefit plan which is a 

 governmental plan under section 414(d) of the Internal Revenue Code of 

 1986; 

(II) a deferred compensation plan under section 457 of the Internal Revenue Code 

 of 1986; or 

(III) a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 

 1986; 

except that such amount under this subparagraph shall not constitute disposable 

income as defined in section 1325(b)(2); or

(ii) to a health insurance plan regulated by State law whether or not subject to 

 such title; or 

 4 For below-median debtors, the inquiry is whether the deduction for voluntary retirement plan contributions is 

“reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor.” 11 

U.S.C. § 1325(b)(2)(A). Thus, pre-BAPCPA case law would be relevant to the inquiry. In re Bruce, 484 B.R. 387 

(Bankr. W.D. Wash. 2012). 

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(B) received by an employer from employees for payment as contributions—

(i) to—

(I) an employee benefit plan that is subject to title I of the Employee Retirement 

 Income Security Act of 1974 or under an employee benefit plan which is a 

 governmental plan under section 414(d) of the Internal Revenue Code of 1986; 

(II) a deferred compensation plan under section 457 of the Internal Revenue 

 Code of 1986; or 

(III) a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 

 1986; 

except that such amount under this subparagraph shall not constitute disposable 

income, as defined in section 1325(b)(2); or

(i) to a health insurance plan regulated by State law whether or not subject to such 

 title[.]

11 U.S.C. § 541(b)(7) (emphasis added). The “except that” portions of the statute, untethered to 

the language that precedes them, together have become known as the “hanging paragraph” of 

Section 541(b)(7). 

The means test form (Official Form 122C-2) contains a line for “Involuntary deductions,” 

defined as “[t]he total monthly payroll deductions that your job requires, such as retirement 

contributions, union dues and uniform costs.” Chapter 13 Calculation of Your Disposable 

Income, United States Courts, Line 17 (April 1, 2016), http://www.uscourts.gov/forms/meanstest-forms/chapter-13-calculation-your-disposable-income, (“Follow Download Form”).

Further, Line 41 of the Form states, in calculating the debtor’s “monthly disposable 

income” for purposes of Section 1325(b)(2), the debtor is to deduct the following amounts from 

the debtor’s “current monthly income” to arrive at the debtor’s “monthly disposable income”: 

The monthly total of all amounts that your employer withheld from wages as 

contributions for qualified retirement plans, as specified in 11 U.S.C. § 541(b)(7) 

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plus all required repayments of loans from retirement plans, as specified in 11 

U.S.C. § 362(b)(19).

Id. at Line 41. 

The issue of voluntary retirement contributions has been the subject of some debate in the 

case law in recent years. There are essentially three divergent lines of cases. The first line of 

cases holds that the debtor is not entitled to any deduction for voluntary retirement contributions, 

whether or not he or she was making voluntary retirement contributions pre-petition. In re 

Seafort, 669 F.3d 662, 674-75 (6th Cir. 2012); In re McCullers, 451 B.R. 498, 503-05 (Bankr. 

N.D. Cal. 2011); In re Prigge, 441 B.R. 667, 672-78 (Bankr. D. Mont. 2010). The second view, 

that voluntary retirement contributions may be continued post-petition as long as they are 

consistent with the debtor’s pre-petition history of contributions, is represented by the Sixth 

Circuit Bankruptcy Appellate Panel’s decision in In re Seafort, 437 B.R. 204 (6th Cir. B.A.P. 

2010), aff’d, 669 F.3d 662 (6th Cir. 2012). The third line of cases, which is the majority view,

concludes that Section 541(b)(7) allows 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. In re Valandingham, 516 B.R. 628 (Bankr. D. Kan. 2014); In re Johnson, 

346 B.R. 256, 263 (Bankr. S.D. Ga. 2006). The Court reviews each line of cases, below. 

A. The Prigge View. 

The first line of cases, represented by Seafort, McCullers and Prigge, holds that debtors 

may not make post-petition voluntary contributions to their retirement plans. This line of cases is 

in the minority. In the Prigge case, the debtor, who was above-median, was a participant in his 

employer’s voluntary retirement plan and was making contributions of $1,181.08 per month 

(reduced to $900.00 per month after he filed for bankruptcy). In re Prigge, 441 B.R. at 670-71. 

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The Prigge opinion, authored by Bankruptcy Judge Kirscher, relies on the fact that voluntary 

retirement contributions are not excluded from the debtor’s disposable monthly income in the 

text of either Section 1325(b) or Section 707(b)(2). Id. at 677. The Prigge court stated in a 

footnote that Section 541(b)(7)’s exclusion of pension contributions from property of the estate 

“seems intended to protect amounts withheld by employers from employees that are in the 

employer’s hands at the time of filing of bankruptcy, prior to remission of the funds to the plan.” 

Id. at 677, n. 5 (quoting 5 COLLIER ON BANKRUPTCY ¶ 541.22C[1] (15th ed. rev.))

Judge Kirscher’s views in Prigge later came before the 9th Circuit Bankruptcy Appellate 

Panel in In re Parks, 475 B.R. 703 (9th Cir. B.A.P. 2012). In Parks, as in Prigge, the debtors 

were making voluntary retirement contributions, pre-petition. Id. at 705. The Chapter 13 Trustee 

objected, and Judge Kirscher sustained the Trustee’s objection, relying on his previous decision 

in Prigge. Id. The debtors appealed. The Ninth Circuit B.A.P. affirmed, holding that “‘such 

amount’ referred to in the hanging paragraph of § 541(b)(7)(A) means only pre-petition 

contributions shall not constitute disposable income.” Id. at 708. The court noted that “nowhere 

in chapter 13 are voluntary retirement contributions excluded from disposable income.” Id. The 

court held: 

Simply put, without a clearer direction comparable to the carve out from 

disposable income for the repayment of retirement loans in § 1322(f), it seems 

unlikely that Congress intended § 541(b)(7)(A) to bestow a benefit on abovemedian chapter 13 debtors while their creditors absorbed an even greater loss.

Id. at 709; see also In re McCullers, 451 B.R. at 505 (“In using the words ‘except that,’ Congress 

suggests that its only purpose was to negate any inference that the exclusion of such 

contributions from property of the estate gives rise to income to the debtor.”) 

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The Seafort case is the only Court of Appeals decision to address the issue. Seafort 

actually involved two cases, those of Ms. Seafort and the Shulers. The facts in Seafort mirror 

more accurately the facts in this case because, in Seafort, the debtors were repaying pension plan 

loans and as a result were not making voluntary pre-petition contributions to their pension plans. 

In re Seafort, 669 F.3d at 663-64. Once the loans were repaid, however, the debtors sought to 

apply that income to post-petition voluntary contributions. Id. The Sixth Circuit agreed with the 

views expressed in Prigge and McCullers, that “Congress intended to exclude from disposable 

income and projected disposable income available for unsecured creditors only voluntary 

retirement contributions already in existence at the time the petition is filed.” Id. at 674. The 

Trustee in the case conceded that “if a debtor is making voluntary retirement contributions when 

the bankruptcy petition is filed, such continuing contributions may be excluded from disposable 

income.” Id. at 674, n. 7. The Sixth Circuit, however, stated that it did not agree with this 

assertion for the reasons stated in Prigge, but that it did not reach the issue because the issue was 

not before it. Id. 

B. The Sixth Circuit Bankruptcy Appellate Panel’s Decision in Seafort. 

The Sixth Circuit Bankruptcy Appellate Panel’s decision in Seafort held that debtors may 

continue to make voluntary contributions to their retirement plans if the debtor was making 

contributions in comparable amounts pre-petition. 437 B.R. at 209-10. Like the Sixth Circuit, the 

B.A.P. placed significance on the placement of the exclusion from disposable income in the 

Code. Id. at 209 (“Because Congress identified 401(k) contributions as excluded in § 541, but 

not in § 1306, the Panel concludes that the absence of any reference in § 1306 to 401(k) 

contributions was intentional.”) 

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After consideration of the competing policy concerns - BAPCPA’s desire “to ensure 

debtors repay creditors the maximum they can afford,” versus Congress’s encouragement of

retirement savings for all Americans – the B.A.P. reached the following conclusion: 

In regard to retirement savings, Congress clearly intended to strike a balance 

between protecting debtors' ability to save for their retirement, and requiring that 

debtors pay their creditors the maximum amount they can afford to pay. This 

balance is best achieved by permitting debtors who are making contributions to a 

Qualified Plan at the time their case is filed to continue making contributions, 

while requiring debtors who are not making contributions at the time a case is 

filed to commit post-petition income which becomes available to the repayment 

of creditors rather than their own retirement plan. To conclude otherwise 

encourages the improvident behavior that BAPCPA sought to discourage. If the 

bankruptcy court is affirmed, debtors who were not contributing to their tax 

qualified plan and borrowing against their own retirement savings may file 

bankruptcy, repay themselves, and, once the loan is repaid, start contributing 

again to their own retirement savings. Allowing debtors to do so would tip the 

delicate balance struck by BAPCPA impermissibly in favor of debtors. On the 

other hand, allowing debtors who are making contributions at the commencement 

of a case to continue making those contributions furthers the goal of encouraging 

retirement savings. Limiting these protections to contributions in place at the time 

debtors file their petitions also protects the goal of ensuring that debtors pay 

creditors the maximum amount debtors can afford to pay.

437 B.R. at 210.

One judge dissented from the B.A.P’s decision, describing the majority’s decision as 

“harsh and uneven.” 437 B.R. at 216 (Shea-Stonum, M., dissenting). Judge Shea-Stonum argued 

that the majority’s ruling discriminated in favor of higher-income debtors and against lowerincome debtors because the former category are more likely to have made contributions 

consistently, pre-petition. Id. at 222-23. Judge Shea-Stonum also noted that the rule allowing 

post-petition contributions is subject to a good faith inquiry. Id. at 223 (“A debtor’s proposal to 

increase or to begin Qualified Contributions post-petition is one of many circumstances that may 

be considered by a court in assessing the debtor’s good faith.”) 

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A number of courts have adopted the Sixth Circuit B.A.P.’s test for voluntary 

contributions. In re Read, 515 B.R. 586 (Bankr. E.D. Wis. 2014); In re Jensen, 496 B.R. 615, 

621 (Bankr. D. Utah 2013) (“The Court agrees with the reasoning of the Sixth Circuit 

Bankruptcy Appellate Panel and concludes that voluntary retirement contributions being made as 

of the date of the petition do not constitute disposable income and debtors may continue making 

those contributions during the life of the plan”); In re Noll, No. 10-35209-svk, 2010 WL 

5336916, at *1 (Bankr. E.D. Wis. Dec. 21, 2010). 

C. The Johnson View.

In Johnson, the court was faced with a good faith objection from the Trustee. 346 B.R. at 

256. The court unequivocally held: “So long as a debtor’s contributions are within the limits 

permitted by the EPB [Employee Benefit Plan] ‘any amount’ of this contribution is exempted 

from disposable income.” Id. at 263. 

In Vanlandingham, the Debtor deducted voluntary monthly 401-K contributions in the 

amount of $151.67 on her means test form, contributions that she was not making pre-petition 

and only started after she filed for bankruptcy. 516 B.R. at 630. The court noted that Section 

541(b)(7)’s hanging paragraph (which it described as “oddly worded” and “awkward”) does not 

distinguish between pre-petition contributions and post-petition contributions. 516 B.R. at 635. 

The court further stated: 

In short, Johnson's interpretation of § 541(b)(7)'s hanging paragraph is most 

consistent with promoting the legislative policy of protecting and encouraging 

retirement savings. There is no reason to protect postpetition 401(k) loan 

repayments, but not postpetition 401(k) contributions in chapter 13.

Id. at 636. 

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The Vanlandingham court held that the Johnson view is also “consistent with the 

Supreme Court’s ‘forward looking approach’ to the definition of ‘projected disposable income’ 

as announced in Hamilton v. Lanning.” Id. at 637. In Hamilton v. Lanning, 130 S.Ct. 2464 

(2010), the Court held that for purposes of disposable income, bankruptcy courts may take into 

account (and depart from the mechanical application of the means test) changes in the debtor’s 

income “that are known or virtually certain at the time of confirmation.” Id. at 2478.5

The Vanlandingham court also mentioned the requirement of good faith, in stating: 

“when an ‘abusive case’ presents itself, the trustee and unsecured creditors are well-armed with 

the ability to object to confirmation for lack of good faith under § 1325(a)(3).” In re 

Vanlandingham, 516 B.R. at 638. 

More recently, the Bankruptcy Court for the District of Massachusetts issued its opinion

on post-petition retirement contributions in In re Drapeau, 485 B.R. 29 (Bankr. D. Mass. 2013). 

The Drapeau opinion agreed with the Johnson view. In its opinion, the Drapeau court rejected 

reliance on the placement of Section 541(b)(7) outside of Chapter 13: 

Section 1306 incorporates all of § 541 into the definition of estate property in the 

Chapter 13 case, including those exceptions detailed in subsection (b). And

because § 541(b)(7) expressly excludes voluntary retirement contributions from 

the bankruptcy estate, there is no need for § 1306 to contain a duplicative 

provision excepting such contributions. The exception becomes applicable with 

the wholesale incorporation of § 541.

485 B.R. at 36 (emphasis in orginal). The Drapeau court also alluded to the good faith of the 

debtor, but held that where the debtor’s ability to make voluntary contributions was interrupted 

by circumstances beyond the debtor’s control (“e.g., a limited period in which a debtor could not 

 5 The Hamilton v. Lanning analogy may be an imperfect one in this context. Hamilton v. Lanning involved a 

departure from the mechanical application of the six-month lookback period of the means test, which requires the 

debtor to state his or her income for the six months preceding the petition date. 130 S.Ct. at 2475-77. In this case, as

in Seafort, the Debtor was not in fact making any voluntary retirement contributions during the six months 

preceding the bankruptcy filing because the Debtor was precluded from doing so, owing to the two hardship loans. 

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contribute on account of a hardship withdrawal”), the court found that the debtor was proceeding 

in good faith. Id. at 38-39.

D. This Court’s Ruling. 

(i) The Trustee’s Disposable Income Objection. 

The Trustee in this case urges the Court to adopt the middle ground of the Sixth Circuit 

B.A.P.’s opinion in Seafort, limiting contributions to those consistently made by the debtor prepetition. The Court, however, adopts the Johnson view, for the simple reason that Section 

541(b)(7) 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 in the statute. There 

is nothing in the text of Section 541(b)(7) from which the Court can conclude that Congress 

intended any such distinctions. Indeed, the use of the term “any amount,” without limitation, 

followed by the term “contributions” compels the conclusion that Congress meant no such 

distinction. See 11 U.S.C. § 541(b)(7)(A)-(B).

In the Court’s view, the absolutist position represented by Prigge and the Sixth Circuit’s 

opinion in Seafort places an unwarranted emphasis on the placement of Section 541(b)(7) 

outside of Chapter 13. As noted by the court in Drapeau, “because § 541(b)(7) expressly 

excludes voluntary retirement contributions from the bankruptcy estate, there is no need for 

§ 1306 to contain a duplicative provision excepting such contributions.” 485 B.R. at 36. 

Similarly, in Vanlandingham, the Court noted: “The fact that Congress's exclusion of qualified 

retirement contributions appears in § 541 rather than § 1325(b)(2) may best be explained by the 

fact that as excluded income, the contributions were never included in disposable income in the 

first instance.” 516 B.R. at 636 (emphasis in original).

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Further, by the time that Section 541(b)(7) was enacted in 2005, the Supreme Court had 

already decided that qualified retirement funds were not property of the estate under Bankruptcy 

Code Section 541(c)(2). Patterson v. Shumate, 504 U.S. 753, 756-66 (1992). Congress’s intent in 

enacting Section 541(b)(7) was to expand upon the protections already in place at the time. See

H.R. Rep. 109-31(1), at 63-64 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 132-33 (“Sec. 224: 

Protection of Retirement Savings in Bankruptcy. The intent of section 224 is to expand the 

protection for tax-favored retirement plans or arrangements that may not be already protected 

under Bankruptcy Code section 541(c)(2) pursuant to Patterson v. Shumate, or other state or 

Federal law.”) (emphasis added). Under Prigge and the Sixth Circuit’s opinion in Seafort, the 

enactment of Section 541(b)(7) in 2005 would have been redundant for pre-petition 

contributions, given 541(c)(2) and Patterson v. Shumate.

6

The Court similarly rejects the middle ground represented by the Sixth Circuit B.A.P.’s 

opinion in Seafort. First, the B.A.P. relied heavily on the placement of the exclusion in Section 

541(b)(7), like Prigge and the Sixth Circuit itself. See In re Seafort, 437 B.R. at 209 (“Because 

Congress identified 401(k) contributions as excluded in § 541, but not in § 1306, the Panel 

concludes that the absence of any reference in § 1306 to 401(k) contributions was intentional.”) 

As noted above, however, “as excluded income, the contributions were never included in 

 6 The Court also finds some guidance to Congressional intent in its use of the term “contributions” in Section 

541(b)(7)(A) and (B). 11 U.S.C. § 541(b)(7)(A)-(B). Once pre-petition contributions are made, they become part of 

a retirement fund. In the 2005 BAPCPA amendments, Congress specifically used the term “retirement funds” in the 

amendments to Section 522, which added exemptions for debtors under both the federal exemption scheme and the 

State opt-out scheme. 11 U.S.C. § 522(b)(3)(C), (d)(12). If Congress meant to exclude only pre-petition retirement 

funds from property of the estate, it might have used the term “retirement funds” in Section 541(b)(7), instead of

“contributions.” Moreover, if Section 541(b)(7) was intended only to protect pre-petition retirement funds (by 

excluding them from property of the estate), then Section 541(b)(7) would have been redundant to Sections 

522(b)(3)(C) and (d)(12), which provided exemptions for the same funds. 

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disposable income in the first instance.” In re Vanlandingham, 516 B.R. at 636 (emphasis in 

original).

The Sixth Circuit B.A.P. also placed reliance on the fact that under Section 541 property 

of the estate is determined at the outset of the case. In re Seafort, 437 B.R. at 209 (“401(k) 

contributions are only excluded in § 541 which specifically applies to property in existence at the 

commencement of the case.”) This view however, simply reads the exclusion of the hanging 

paragraph of Section 541(b)(7) (“any amount . . . shall not constitute disposable income as 

defined in section 1325(b)(2)”), which is clearly referring to the disposable income requirement 

in Chapter 13, out of the statute. 11 U.S.C. § 541(b)(7).

The Sixth Circuit B.A.P.’s requirement that post-petition contributions be comparable to 

the debtor’s historic, pre-petition contributions appears to be grounded more in policy concerns 

than in the text of Section 541(b)(7). In the end, the Johnson line of cases hews the closest to the 

statutory text and Congress’s intended purpose in enacting Section 541(b)(7) in 2005. The Court, 

therefore, overrules the Trustee’s disposable income objection. 

(ii) The Debtor’s Good Faith. 

Finally, good faith is an independent requirement for confirmation of a Chapter 13 plan. 

11 U.S.C. § 1325(a)(3). The Court agrees with the Johnson and Drapeau opinions that the 

debtor’s good faith must be considered. In re Johnson, 346 B.R. at 260-61; In re Drapeau, 485 

B.R. at 38-39. The Court cannot conclude, however, that the Debtor is proceeding in anything 

other than good faith here. As in Drapeau, the Debtor was locked out of making voluntary 

contributions to his retirement plan on account of the hardship loans that he had taken out prepetition. In re Drapeau, 485 B.R. at 31. The Debtor’s proposed contribution of $268.62 per 

month is well within ERISA limits for employee contributions. See Retirement Topics-401(k) 

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and Profit Sharing Plan Contribution Limits, IRS (Oct. 26, 2015), 

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-andprofit-sharing-plan-contribution-limits (“The limit on employee elective deferrals . . . is: $18,000 

in 2015 and 2016”); see also Annual Limit on Elective Deferrals, Federal Retirement Thrift 

Investment Board (December 2015), https://www.tsp.gov/PDF/formspubs/oc91-13.pdf . The 

Debtor has no other pension benefits available to him.

The Court finds that the Debtor is proceeding in good faith, and overrules the Chapter 13 

Trustee’s good faith objection. 

Conclusion 

For the foregoing reasons: 

A. The Trustee’s Objections to the Debtor’s claim of exemptions under Va. Code §§ 

34-4 and 34-29 are sustained. The Trustee will submit an Order within 10 days sustaining the 

Objection. 

B. The Trustee’s Objections to the Debtor’s Plan on disposable income and good 

faith grounds are overruled. 

C. The Court will set a status hearing in this matter for August 11, 2016, at 1:30 

p.m.7

Date: _____________________ ___________________________________

Brian F. Kenney

Alexandria, Virginia United States Bankruptcy Judge

 7 Given that the Court has sustained the Trustee’s Objections to the Debtor’s claim of exemptions, the Court does 

not know whether the Debtor’s Plan meets the liquidation test and the disposable income test of 11 U.S.C. §§ 

1325(a)(4) and 1325(b). 

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Copies to:

Ricardo Cantu, Jr. 

1042 Harbour Drive 

Stafford, VA 22554 

Debtor

Janet Elizabeth Boyd, Esquire

Janet E. Boyd, Attorney At Law, PLC 

385 Garrisonville Rd. Ste 203 

Stafford, VA 22554

Counsel for the Debtor

Thomas P. Gorman, Esquire

300 N. Washington St. Ste. 400 

Alexandria, VA 22314

Chapter 13 Trustee

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