Many times, people who considering filing bankruptcy because of limited funds and/or limited income that are available to them. Specifically, many people receiving limited income through social security benefits receive just enough, if even that, to meet their monthly needs.
In such situation, many people consider filing bankruptcy to get rid of their unsecured debts such as credit card debts, payday loans, medical bills, etc., pretty much "trim the fat" in their financial situation so that they can meet their reasonable and necessary needs.
However, because their only source of income is from social security, many people want to make sure that their social security benefits are protected or cannot be taken from them if they file a bankruptcy.
Not to worry, in the bankruptcy code, social security benefits are excluded from the determination of "current monthly income" pursuant Section 101(10A) as well as under the Social Security Act Section 407(a) which specifically prevents moneys received under the Social Security Act from being subject to any bankruptcy or insolvency law.
Although this analysis seems fairly straight forward, when this issue is presented before the Court's in a Chapter 13 bankruptcy, confusion of whether or not social security benefits is included in the determination of projected disposable income under Section 1325(b)(1) has brought different conclusion between the courts.
Recently, here in the 5th Circuit, a case called Beaulieu v. Ragos, an appeal filed from the bankruptcy court for the Eastern District of Louisiana, the Court held that Social Security Income was excluded from both the determination of disposable income under Section 101(10A) as well as from the projected disposable income under 1325(b).
The relied on the language provided under section 101(10A) as well as the Social Security Act to discuss the expanded reading to encompass the determination of projected disposable income. Moreover, the Court relied on the reading under In re Nowlin, 576 F.3d 258 (5th Cir. 2009) and Hamilton v. Lanning, 130 S.Ct. 2464 (2010) to discuss the rebuttable presumption regarding the deviation between the figures used for the disposable income and projected disposable income.
In conclusion, Social Security benefits are protected in a Chapter 13 bankruptcy to the extent that it will not be required to be included under the disposable income and projected disposable income.
If you have any questions about your rights and concerns regarding the bankruptcy process, contact us.
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