Tag: disposable income

Treatment of Social Security Benefits in Chapter 13 Bankruptcy

I have previously written that Social Security income, whether retirement, survivor benefits, SSI or Social Security disability are not included in debtor’s income for the purposes of means testing. While not included in the means test figures, do the debtors have to include such payments in their Chapter 13 Bankruptcy plan and use that income toward making their plan payments?

According to a decision from the Bankruptcy Court for the Northern District of New York, a Chapter 13 Plan can be confirmed despite not including Social Security retirement income. In In Re Burnett, together with its companion case, In re Uzailkos, the proposed payment plans did not include social security income on Schedule I. As filed, the Burnett plan projected paying usecured creditors 10% of their claims, Uzailko’s plan proposed to pay creditors 37%.

Because social security income was not included, the Burnett’s Schedule I income exceeded Schedule J expenses by $493,67. If social security was included, the income available for repayment would increase by $878 to $1,371.67. For Uzailko, the available payment amount would increase $400.25 to $1,496.25.

The Chapter 13 Trustee filed objections to both plans arguing that the cases were not filed in “good faith” because social security income was not included in calculating the minimum plan payment. A “good faith” objection is the general objection to confirmation of a Chapter 13 Plan. Under the Bankruptcy Code Section 1325(a)(3), a plan which fails to pay this disposable income minimum can be denied confirmation on the grounds the debtor’s plan was not filed in good faith.

Social security income different from other forms of income under BAPCPA. Under BAPCPA, Section 101(10A) was modified to exclude Social Security benefits from the the Chapter 7 Bankruptcy means test and the Chapter 13 Bankruptcy disposable income test.

After reviewing different lines of cases addressing these issues, the court accepted the reasoning in a series of cases that held that the treatment of social security income in BAPCPA’s disposable income test precluded requiring a chapter 13 debtor to apply social security income in a plan. Accordingly, as there were no other ‘bad faith’ factors in Burnett and Uzalko cases, the judge confirmed the plans over the trustee’s objections.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Do Both Spouses Have to File for Bankruptcy Together?

While most married people think that if they file for Chapter 7 bankruptcy or Chapter 13 Bankruptcy, they must do so with their spouse.  That is not true.

Whether one spouse or both file a bankruptcy petition, it’s their choice. It is not uncommon for one spouse to have most of the debt in his or her name only, in which case an individual filing would more appropriate. However, if both spouses are have a significant amount of debt, they should file together.

Sometimes I meet with only one spouse because the other spouse is is not willing to file for bankruptcy.  In these situations, one spouse to file the bankruptcy petition and obtain necessary relief from the bankruptcy court.

There are also some additional issues that need to be considered. Initially, if only one spouse is filing and the couple is residing together, the other spouse’s income may be relevant for the purpose of household income as reflected on Schedule I, resulting disposable income reflected on Schedule J, and that spouse’s income may also be relevant for the means test.

As far as the means test, it is necessary to determine whether there is a presumption that there is enough disposable income available to give unsecured creditors sufficient payment under a Chapter 13 bankruptcy plan, such that permitting a Chapter 7 could be considered an abuse of discretion. But even if the means test is passed, and no presumption of abuse arises, or, alternatively, if this is a non-consumer bankruptcy and the means test is not even required, abuse can still be found given the totality of the circumstances. The income and assets of the non-filing spouse are important in both those considerations. If the debtor has legal rights to share in the income and assets of a non-filing spouse or even if the practice has been between spouses to share income and assets regardless of legal rights, the bankruptcy law tells us that the debtor’s access to the non-filing spouse’s income and assets has to be considered in deciding whether the bankruptcy court would permitting a Chapter 7 bankruptcy filing.

An experienced bankruptcy attorney can analyze each consumer’s financial situation and suggest whether a married couple should file an individual or a joint petition.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.