Social Security Benefits Exempt from Chapter 13 Payments, Middle FL

[OHBOY]

I have read that Social Security Benefits are Exempt From Chapter 13 Payments (this according to a BK judge toward the end of '11 in Jacksonville/Middle District in FL.

At first sight this sounds grrrreat !..... but, just wondering if they still take SS into CONSIDERATION as overall AVAILABLE money and let's say if one has (i.e.) $ 1000, INCLUDING SS to make as a monthly chapter 13 payment...ok, they can't take the SS, but can they take $ 1000 from NON SS funds (i.e. spouses income).

Really confused....looking for input.

[Pandora]

SS is exempt from the means test however it is not exempt from your Schedules when calculating your DMI. You can be under median and eligible for a Ch. 7, however once schedules are done / DMI availability calculated - you can end up with + DMI, enough to fund a Ch. 13 (such as our case).

[OHBOY]

Pandora, Thanks for the input, however I am making reference to a recent ruling that's described below (and the way I read it, would extend to exempt SS period, not just on the means test :


In Re Vandenbosch answers the question of whether a Chapter 13 Debtor must include their social security benefits in the determination of monthly income in Southwest Florida. In the past, debtors were required to use their social security to repay creditors claims in their bankruptcy plans. This was a very unfair practice in my opinion, and therefore, The Dellutri Law Group decided the issue needed to be heard by an appellate court.

In a very recent opinion, Judge Steele of the U.S. District Court in Fort Myers, Florida overruled the Bankruptcy Court decision to include Social Security Benefits into Disposable Monthly Income. In the case of In Re Vandenbosch, one of the issues on appeal was whether a debtor who receives social security benefits must include those benefits as part of their income in the determination of available monthly income. Judge Steele ruled that a Chapter 13 debtor does not have to include their social security benefits in the calculation of monthly income.Disposable monthly income is determined by looking at a Chapter 13 debtor(s) income from all sources and then subtracting all of their ordinary and necessary expenses. The money leftover is the debtor’s disposable monthly income. In a Chapter 13, the debtor or debtors must turnover all of their income to the Chapter 13 Trustee for distribution to the unsecured creditors.

When the debtor’s disposable monthly income included social security benefits, this put the bankruptcy code at odds with the social security statute. The social security statute clearly states that benefits are exempt from creditor’s claims. Logically, it seems that these exact same benefits should not be used to pay the claims of creditors during a bankruptcy proceeding.

In a prior post on Bankruptcy Law Network, Attorney Wendell Sherk, noted the exact same issue before the 8th Circuit Bankruptcy Appellate Panel. The 8th Circuit came out with the same conclusion, that social security should be excluded from disposable income; however, the Court there did not look at the bad faith issue. Judge Steele found no bad faith in the Vandenbosch decision.

Why and How Bankruptcy Courts came to the determination that social security benefits should be included in disposable income was shocking to me. Now that the issue has been decided by Judge Steele many other people, senior citizens on social security included, should be looking at the benefits of Chapter 13 bankruptcy.

Without having to include their social security benefits into the determination of disposable income, a person or couple who receive social security benefits repayment plan could look much different now than they did a couple of months ago.

»crosslinked«

[HHM]

Yes, there has been some movement on this issue. And you are correct, in some districts and circuits, SSI and SSDI are wholly exempt. (it is only SSI and SSDI, no other type of benefit that I am aware fall into this category) Which seems to be the original intent. By my reading of the code, a debtor "may" elect to include SSI in a chapter 13 if it is in the debtor's best interests to do so, but the debtor is not required to do so.

[OHBOY]

So the way I therefore understand it is that if a person elects not to include Social Security Retirement benefits that it would not create a problem with the 'good faith test'. (meaning that by including SS there would be enough to make substantial repayment, however by not including SS there would not be much at all...)

[HHM]

OHBOY

That is basically what it says. But it is still very much a minority view. In most cases, Pandora's statement is accurate. You can exclude SSI from the means test, but on Schedule I & J it must be accounted for and in many districts if I & J are showing disposable income, that debtor will be chapter 13.

[OHBOY]

HHM:
Thanks for your valued input.

From what I am reading though 'regular' Social Security (the retirement benefit portion, not just the disability part) seems to be covered by this ruling.

I also just stumbled across this (below) which seems to answer what I was curious about, namely as noted in the last paragraph the bad faith issue as a possibility.
I visualized a case where one may have enough overall DMI to make substantial repayment, however by exempting SS there would hardly be anything left for repayment....interesting....


Thursday, February 2, 2012
District Court reverses Trustee Waage on social security income
In In re Vandenbosch, 459 B.R. 140 (M.D. Fla. 2011) Judge Steele reversed the Ft. Myers Bankruptcy Court's decision finding that social security income must be included in projected disposable income devoted to the chapter 13 plan. Prior to BAPCPA social security income was typically included in determining disposable income in chapter 13. While some courts have ruled that this practice continues in a forward-looking examination of projected disposable income, Judge Steele determined that that approach was erroneous.

§101(10A) excludes social security benefits from the defined term current monthly income. The inclusion of this section amending current monthly income was a clear indication of an intended departure from prior law. Thus, the forward-looking approach to determining projected disposable income is to take the average monthly income from all sources derived in the 6 months prior to filing, less the amounts reasonably necessary for maintenance, but excluding benefits received under the Social Security Act. This plain reading of the statute is consistent with 42 U.S.C. §407(a) providing that the right to payment under such chapter is not subject to legal process or to the operation of any bankruptcy or insolvency law.

The appellate court noted that the lower court also indicated that it would consider the failure to devote social security income in future cases as a factor in determining bad faith. However, since no ruling was made as to the bad faith in this case, no ruling is made as to this in the appellate decision.
Posted by Tampabankruptcy at 11:11 AM 0 comments Links to this post
Labels: 42 USC 407(a), disposable income. 449 BR 473, social security benefits, Vanderbosch

[Pandora]

Huh - wasnt aware they were moving on this issue - which they should've done LONG ago *sighs* Our district requires it be included, regardless if SSD, SSI or retirement.

Thanks for the update Will have to watch how this plays out.

[tobee43]

we were not a chapter 13, but a 7 in the middle district. both our ss and pension (due to the nature of the pension only certain are exempt) where, in fact wholly exempt.

at the time, as well we were collecting unemployment insurance and it varied actually from county to county whether that was temporary income fully exempt. the county next to us did not exempt while the county we lived did. we appeared to have no or very little dmi as a result.

also note that florida is exception odd in the respect that many times the process and what is expected and counted varies from county to county as opposed to what one would consider the entire state. once again, i stress our situation was with a 7, however, i can't understand why the courts would look at in one what in one chapter and another way in another.

[O2brnot2b]

October 26 (Consumer Bankruptcy News) – The Bankruptcy Code says Social Security income is not included in a debtor’s “disposable income.” Because it is not included in “disposable income” it cannot be included in a Chapter 13 debtor’s “projected disposable income.” Neither the Supreme Court’s Lanning ruling nor good faith changes this outcome, and requires that Social Security income be committed to plan payments, the 10th U.S. Circuit Court of Appeals ruled in Anderson, Trustee, v. Cranmer (In re Cranmer), 2012 WL 5235365 (10th Cir. 10/24/12).

[justbroke]

I'm wondering if Vandenbosch is binding in all the Middle District. This was not a BAP review. In any event, it should be the law. The only problem I really see is where a Chapter 13 debtor actually needs the money from the SS benefits in order to fund the Chapter 13. What I'm trying to say is that if the debtor is keeping a home and trying to lien strip, or something else, and needs "some" income in order to "fund" the plan, then the SS benefits would be necessary. In that particular case and because they are not SS benefits, you'd have to use them to fund the plan.

(I didn't notice that this is an old thread. I wonder what's going on in the Middle!)

[MSbklawyer]

Just this week, the 10th Circuit Court of Appeals in a decision from Utah, held that Social Security is not considered in bankruptcy for ANY purpose; I/J or the means test.

http://www.ca10.uscourts.gov/opinions/12/12-4002.pdf

With this decision at the circuit level, I think this is probably now the majority view.

[justbroke]

Thanks for the update MSbklawyer. I hope we see more synergy throughout the Circuits and the 11th Circuit (my Circuit) gets their but in gear. On a personal note, it's a shame that these things need to be "fought" all the way up to the Circuit. I wonder how many cases weren't confirmed or the debtor had a higher payment to the Trustee, because they had to include the income in their Schedule I/J and Means Test?

[MSbklawyer]

Thanks for the update MSbklawyer. I hope we see more synergy throughout the Circuits and the 11th Circuit (my Circuit) gets their but in gear. On a personal note, it's a shame that these things need to be "fought" all the way up to the Circuit. I wonder how many cases weren't confirmed or the debtor had a higher payment to the Trustee, because they had to include the income in their Schedule I/J and Means Test?

The new bankruptcy law is so shabbily written, that a lot of stuff that could have been made clear in the statute is going to have to be litigated up to the circuit or Supreme Court level before we have any uniformity. The sad thing is that bankruptcy filers, almost by definition, don't have the financial wherewithal (financial wherewithal = money, for you LSU grads out there) to take the cases up.

[justbroke]

Well, it (BACPA 2005) is certainly keeping people busy!