Contact: John Hartgen
703-739-0800
DEBTORS’ GOOD-FAITH USE OF A
401(K) LOAN TO AVOID BANKRUPTCY SHOULD NOT TRIGGER PRESUMPTION OF ABUSE
IN A CHAPTER 7 FILING, ACCORDING TO LATEST ABI QUICK POLL
September 5, 2008, Alexandria, Va.
size='3'>— A majority of respondents (78 percent) in a recent ABI
Quick Poll agreed that debtors’ good-faith
use of a 401(k) loan to pay off debt in an attempt to avoid bankruptcy
constitutes special circumstances rebutting the presumption of abuse in
a chapter 7 case. Fifty-four percent of
respondents “strongly agreed” and 24 percent “somewhat
agreed” that a debtors’ use of a 401(k) loan to avoid
bankruptcy was a circumstance that should not trigger a presumption of
abuse if the debtor eventually files for chapter 7
protection.
Twelve percent of respondents, however, thought
that the use of a 401(k) loan by a debtor to avoid
bankruptcy could constitute a presumption of abuse in a chapter 7 case.
Eight percent “disagreed strongly” and four percent
“somewhat disagreed” that a debtor’s good faith use of
a 401(k) loan to avoid bankruptcy rebutted the presumption of abuse in a
debtor’s chapter 7 filing Eight percent of respondents did not
know or had no opinion on the issue.
In the case of In re
Cribbs
size='3'>,the U.S. Bankruptcy Court for
the Southern District of Georgia found that the debtors used a loan from
their 401(k) plan in a good-faith effort to settle with their creditors
to avoid filing for bankruptcy. While the debtors eventually had to file
for chapter 7, the court held that the debtors’ good-faith use of
the loan to avoid bankruptcy as a special circumstance negated the
presumption of abuse in the chapter 7 case.
ABI members and members of the public were welcome to
submit their response to the statement: “Debtors’ good faith
use of a 401(k) loan to pay off debt in an attempt to avoid bankruptcy
constitutes special circumstances rebutting the presumption of abuse in
a chapter 7 case.
face='Times New Roman' size='3'>In re Cribbs,
387 B.R. 324 (Bankr. S.D. Ga. 2008).”
ABI’s Quick Poll is posted on ABI’s home
page,
size='3'>www.abiworld.org. ABI members and the
public are invited to respond to a question on a timely bankruptcy or
insolvency issue. Visit
href='http://www.abiworld.net/quickpoll/'>
color='#0000ff' size='3'>http://www.abiworld.net/quickpoll/
to access the results of previous ABI Quick
Polls.
###
ABI is the largest multi-disciplinary, nonpartisan
organization dedicated to research and education on matters related to
insolvency. ABI was founded in 1982 to provide Congress and the public
with unbiased analysis of bankruptcy issues. The ABI membership includes
nearly 11,700 attorneys, accountants, bankers, judges, professors,
lenders, turnaround specialists and other bankruptcy professionals,
providing a forum for the exchange of ideas and information. For
additional information on ABI, visit
href='http://www.abiworld.org/'>
size='3'>www.abiworld.org. For additional
conference information, visit
href='http://www.abiworld.org/conferences.html'>
size='3'>http://www.abiworld.org/conferences.html
size='3'>.