Posted by NCBRC - August 26th, 2020
A debtor’s social security income is a proper factor to consider in an abuse analysis under section 707(b)(3)(B) and in a good faith analysis under section 1325(a)(3). Meehean v. Vara (In re Meehean), No. 20-10380 (E.D. Mich. Aug. 18, 2020).
When they filed their chapter 7 petition, debtors listed $5,842 in monthly income ($4,007 in Social Security benefits and $1,835 in pension income) and $4,446 in monthly expenses. They had $142,871 in secured mortgage debt and $43,100 in unsecured non-priority debt. The trustee moved to dismiss the petition as an abuse of bankruptcy, arguing that, if the debtors committed their social security income to a chapter 13 plan, they could pay off their unsecured debt over five years. The bankruptcy court agreed and granted the trustee’s motion. In re Meehean, 611 B.R. 574 (Bankr. E.D. Mich. 2020).
The debtors appealed to the district court arguing that the bankruptcy court erred by considering social security income as a factor in a totality of circumstances test for abuse of bankruptcy under section 707(b)(3)(B). Read More
Posted by NCBRC - August 23rd, 2018
In calculating set-off under section 553, the bankruptcy court properly used the amount of the back-award accrued from the date of the debtor’s eligibility even though the debtor was not entitled to receipt of those benefits until within 90 days of filing her bankruptcy petition. Berg v. Social Security Admin., 900 F.3d 864 (7th Cir. 2018).
For a time, and through no fault of her own, Peggy Berg received social security benefits after she was no longer eligible. When the SSA caught its error, Ms. Berg began repaying the overpayment. She reapplied for social security benefits in March, 2014, and she was awarded benefits as of May, 2013. She did not receive her Notice of Award, however, until July 30, 2014. The Notice informed Ms. Berg that the SSA would set-off the almost $20,000 representing her remaining debt from the back-award it owed her. On August 7, 2014, Ms. Berg filed a bankruptcy petition and an adversary complaint seeking to reverse the set-off under sections 553(b) and 522(h). The bankruptcy court found that approximately $2,000 was improperly withheld by the SSA. The Seventh Circuit granted Ms. Berg’s petition for direct appeal. Read More
Posted by NCBRC - March 15th, 2018
The SSA’s withholding of benefits from one program to recover fraudulently-obtained payments made under a separate program was not a “recoupment” free from the strictures of the automatic stay. U.S.A. v. Johnson, No. 17-5224 (N.D. Ill. March 12, 2018).
For more than three years John Johnson fraudulently received retirement social security benefits. Upon learning of the fraud, the SSA calculated that he owed almost $58,000 in ill-gotten benefits and penalties and began withholding his legitimate disability benefits. Mr. Johnson filed for chapter 13 bankruptcy and argued that the SSA’s withholding of his disability benefits violated the automatic stay. The bankruptcy court agreed and the SSA appealed. Read More
Posted by NCBRC - March 6th, 2018
Where the debtor lived with his mother and they shared all income and expenses, he correctly included her expenses and excluded her social security benefits in his projected disposable income calculation. In re Palcher, 2018 WL 481863, No. 7:17-bk-3938 (Bankr. D. S.C. Jan. 16, 2018).
Above-median debtor, Michael Palcher, proposed a chapter 13 plan to pay his mortgage directly and pay approximately 6.7% to unsecured creditors through the plan. The trustee objected to confirmation arguing that, because Mr. Palcher did not include his mother’s social security in his projected disposable income, the plan did not comply with section 1325(b) and was proposed in bad faith. Read More
Posted by NCBRC - September 1st, 2017
Where the debtor’s plan proposed terms that were within bankruptcy and social security parameters, and there was no evidence of misconduct or bad faith, the bankruptcy court erred in declining to confirm his plan due to his failure to voluntarily contribute some of his social security funds. In re Manzo, No. 16-7218 (N.D. Ill. Aug. 25, 2017). Read More
Posted by NCBRC - June 14th, 2016
Finding no logical relationship between the debtor’s obligation to repay pre-petition overpayments and her entitlement to future social security benefits, a bankruptcy court in the eastern district of California denied the Social Security Administration’s request for recoupment. United States v. Angwin, No. 15-11120, Adv. Proc. No. 15-1080 (Bankr. E.D. Cal. April 5, 2016). Read More
Posted by NCBRC - September 10th, 2014
A Treaty between Canada and the United States that became effective in 1984 was the basis for a bankruptcy court finding that Canadian Old Age Security (OAS) benefits should be treated the same way as U.S. social security benefits for purposes of application of the Bankruptcy Code. In re McPhee, No.13-36046 (Bankr. E.D. Va. Aug. 26, 2014). Read More
Posted by NCBRC - February 19th, 2014
A debtor must report a new award of social security benefits during the course of her chapter 13 plan without regard to whether that income can be used to fund the plan. In re Wheeler, No. 09-13597 (Bankr. N.D. Ind. Dec. 18, 2013). Read More
Posted by NCBRC - July 1st, 2013
In a significant win for debtors, the Fourth Circuit today held “that the plain language of the Bankruptcy Code excludes Social Security income from the calculation of ‘projected disposable income,’ but that such income nevertheless must be considered in the evaluation of a plan’s feasibility.” Ranta v. Gorman (In re Ranta), No. 12-2017 (July 1, 2013). Read More
Posted by NCBRC - March 25th, 2013
The Ninth Circuit today held that “Congress’s adoption of the BAPCPA forecloses a court’s consideration of a debtor’s Social Security income or a debtor’s payments to secured creditors as part of the inquiry into good faith under 11 U.S.C. § 1325(a).” Drummond v. Welsh (In re Welsh), No. 12-60009 (9th Cir. March 25, 2013), aff’g Drummond v. Welsh (In re Welsh), 465 B.R. 843 (B.A.P. 9th Cir. 2012).
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