If you are considering bankruptcy in Indiana and receive social security benefits you are almost certainly going to wonder how the social security will affect your payment. As you may recall from other blog posts, Chapter 13 bankruptcy is similar to debt consolidation. You pay one monthly payment to a Chapter 13 trustee who then pays your creditors out based on a repayment plan drafted by your bankruptcy attorney.
The calculation of the amount of your trustee payment is a long calculation. However, the payment is generally the greater of the amount that you actually have left at the end of the month when taking into account all of your income (including social security) and deducting your reasonable living expenses and the amount that the bankruptcy disposable monthly income test says you should have left at the end of the month (not including social security).
What that has meant for hoosiers in “bankruptcy world” in the past was that they were often using their social security income to be able to make at least a portion of their Chapter 13 trustee payment. Since social security is income that cannot be garnished by most creditors, many people are surprised that the Chapter 13 trustee can take part of their social security income for the payment of creditors.
However, it seems that bankruptcy courts may now be taking a new position on Chapter 13 payments and whether social security income may be taken into account in order to calculate a proper Chapter 13 repayment amount. The seventh circuit court of appeals, which is the court that controls Indiana law has yet to issue a decision directly on this topic. However, several other circuits around the county have found that social security income should be excluded in any calculation of how much a Chapter 13 debtor must pay to the Chapter 13 trustee. However, it is of note that one of the judges for the seventh circuit did help to author an opinion out of the ninth circuit that decided that social security income should be excluded from a Chapter 13 repayment plan.
The bottom line is that if you have social security income on top of other income to your household and you would like to file a Chapter 13 bankruptcy there is at least an argument that your social security income should not be taken into account. These are the type of arguments that get most bankruptcy attorneys excited because we see it an opportunity to advance case law for the debtors (our current and future clients). So, if you are a person that is considering filing bankruptcy and you have social security income please don’t hesitate to contact me. You never know if your case is the one that will decrease Chapter 13 payments for many future Chapter 13 debtors.
In fact, if you have a lot of debt and are thinking about bankruptcy regardless of where you income comes feel free to contact Halcomb Singler, LLP, for a free initial consultation. Erika K Singler will sit down with you for about an hour to go over your situation, give you a recommendation for or against bankruptcy and to answer all of the many questions you probably have about debt settlement and/or the bankruptcy process. Call today for your consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.