by NACBA has once again taken arms against a threat to debtors’ social security benefits by filing an amicus brief in the case of In re Ranta, No. 12-2017 (4th Cir.). The bankruptcy court denied confirmation of the debtor’s plan upon objection by the trustee that the debtor had failed to dedicate his social security income to the plan. The district court affirmed.
This holding cannot be reconciled with Congress’s clear intent to protect social security benefits from creditors as evidenced by provisions included in both the Social Security Act and the Bankruptcy Code. Section 101(10A) of the Code defines “income” as excluding social security benefits. That definition directs the interpretation of section 1325(b) which provides that a plan shall not be confirmed over objection unless it includes all of the debtor’s projected disposable income. Section 1325(b)(2) defines “disposable income” in terms of current monthly income which is, in turn defined by section 101(10A) to exclude social security benefits. That these provisions in the Bankruptcy Code protect social security benefits from the reach of creditors is reinforced by the complementary provision of the Social Security Act, section 407(a), which provides that social security benefits are not subject to the operation of bankruptcy or insolvency laws.
Finally, because debtors are statutorily relieved from having to contribute their social security benefits to their chapter 13 plans, it cannot be bad faith to do just that.
Thanks to Geoff Walsh for writing NACBA’s brief.