Social Security Income in Chapter 13

I received an email about the treatment in Chapter 13 bankruptcy of money received for basic social security and for social security disability. Social security payments do not count as income for computation of means test eligibility under the new bankruptcy law.. Yet, once someone wants to, or is forced into, a Chapter 13 bankruptcy instead of a Chapter 7 there is a separate income issue. The issue in a Chapter 13 is the amount of the debtor’s disposable income. Debtor’s must pay all disposable income to the Chapter 13 trustee. If the social security payments count as disposable income then the debtor would have to pay more money to his creditors and the trustee during the Chapter 13. I had thought that social security disability money counted for disposable income but that basic social security receipts did not count as income because it was not part of the income definition under the means test.

I posed the question to the Chapter 13 trustee at a recent meeting of creditors. The Trustee stated that in the Orlando Division both basic social security money and disability are taken into account in computing the debtor’s disposable income. He said that there were court rulings in this Division sustaining his position. Interestingly, he said that the law of this question is different in different bankruptcy Divisions around the country. Florida debtors considering Chapter 13 need to check on the rules in their particular bankruptcy court.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Comments

[jamie badala]

I receive social security disability thru the railroad retirement board, and the date of the settlement was April 2008, the same time as we received our approval for chapter 13, and I never thought much about it till now, I just assumed that my husband took care of the paperwork and now am wondering after reading this, exactly what should I do, I never reported the income increase, I intend to do so now, but in the meantime, do you have more info on the subject, and how can the rules be different county to county? I don't like being in trouble, and wish I would have thought about this before now. Thanks