Social Security Income and Banktruptcy

MAN - OlderIn October, the U.S. Court of Appeals, Tenth Circuit upheld the district court when it concluded that social security income should not be included in the calculation of projected disposable income for people filing for Chapter 13 bankruptcy.

It was noted that “projected disposable income” is defined as “current monthly income” minus the amount needed for the debtor’s support in section 1325(b).

This gives people who are receiving social security the option to file for bankruptcy if they need to, without having to include the social security in their projected disposable income.

The second argument was over whether this exclusion would be in ‘bad faith’ or ‘good faith.’

The court stated, “When a Chapter 13 debtor calculates his repayment plan payments exactly as the Bankruptcy Code and Social Security Act allow him to, and thereby excludes SSI, that exclusion cannot constitute a lack of good faith.”

Several other circuits have the same issue pending and this decision may play an influential role.

Written by: Mary Ann Pekara of Total Bankruptcy

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