Miami retirees should pay close attention to a recent bankruptcy case decided by the 10th Circuit Court of Appeals. According to the judges in this case, the bankruptcy code says that Social Security income is not considered part of a debtor’s disposable income.
And, according to a recent feature story by
Reuters News & Insight, because of this it also can’t be included in the projected disposable income of someone filing for Chapter 13 bankruptcyprotection.The case is an important one for retirees who file for Chapter 13 bankruptcy. Under this form of bankruptcy protection, a repayment plan is created for a filer struggling with debts. When creating this plan, the court looks at debtors’ income and debts. Eliminating Social Security income from this debt provides a significant benefit to debtors seeking this form of bankruptcy protection.
In the case cited in the
Reuters report, the Chapter 13 debtor is receiving $1,940 a month in Social Security income. The debtor did not list this income in his summary of his disposable income. The debtor, though, did disclose this Social Security income on his Schedule I and deducted a portion of this income on his Schedule J as a form of exempt Social Security benefit.
A bankruptcy court initially ruled that the Social Security payments should have been listed in the debtor’s projected disposable income. The court also ruled that the debtor displayed bad faith by not doing this.