Social security question (AARP Bulletin) chapter 13

[DYLAN150]

I read this today in the AARP bulletin dated Dec 2010. Is this correct?

Question: I filed for chapter 13 bankruptcy after being laid off. Do social security benefits count as income in bankruptcy, or are they protected?

Answer: Your benefits are protected. Social security is excluded from the calculation of disposable income when setting up a debtor repayment plan.

[OHBOY]

Dylan150:
I too would like to hear the REAL scoop on whether or not AARP gave the correct answer.
My understanding on that topic has been that SS is NOT included in MEANSTEST calculation, but that it IS INCLUDED as income for any calculations outside (and beyond) the Meanstest.
I know, as per Social Security it is not 'supposed' to count as 'income', however the Bankruptcy courts don't seem to have heard of that little 'tidbit'...

[Pandora]

SS does not count for the means test eligibility, but it is counted towards paying back your plan in a 13 - or at least mine was/is.

[SunshineGal]

I believe this is district specific, possibly even "Judge" specific.

[Pandora]

you may be right Sunshinegal ... I know for us.... mine is counted.

[catleg]

I think benefits of the Social Security Act are protected from bankruptcy (as well as garnishment outside of BK). However in a chapter 13 you may choose to include them if you need them to come up with a feasible plan.

[DYLAN150]

I e-mailed several attorneys here in the Northwest and ask them about social security. I have three replys so far and all say "it is not counted on the means test but is counted as income on a chapter 13 as monthly income?

[HHM]

Here is the REAL SCOPE (and it is technical).

For the "MEANS TEST", SSI benefits do not count as income. This is important in the chapter 13 context. Most of us know that you take a means test to qualify for chapter 7. However, you also take a Means Tests (Form B22C) to determine, preliminarily, what gets paid to unsecured creditors in chapter 13 bankruptcy. For example, if the chapter 13 means test says you have $200 DMI, then unsecured Class 4 creditors must receive $12,000 (200 x 60) over the life of the chapter 13 plan. That means test creates HUGE problems when there are other classes of debt that must be paid, e.g. mortgage arrears, tax debt etc. B22C is ONLY used to determine what unsecured creditors receive. So, if your schedule I&J does not have DMI to pay $12,000 to unsecured creditors, and your $8,000 in mortgage arrears, your plan is not feasible and will be dismissed. On the MEANS TEST, SSI does not count as income, so it is unlikely a person receiving SSI would have a positive DMI number on his B22C

HOWEVER, on schedule I (schedule of income), SSI DOES go on the petition. SSI is still a "source" of recurring, monthly income. So a debtor can file a chapter 13 and count SSI as income to help fund the plan. So, if the debtor is behind on his mortgage, but can otherwise afford the mortgage and can cure the arrears, the chapter 13 will allow the debtor to count his SSI income in order to fund that plan. The benefit is that he does not need to include the income on the Chapter 13 means test, therefore, unsecured creditors need not receive any funds (assuming no DMI from other sources).

Note, you WILL NOT be pushed into chapter 13 if you pass the chapter 7 means test. SSI does not count as income on the means test. So, if, on schedule I, your show disposable income because of SSI benefits, that is not a ground to object to the chapter 7 assuming the debtor passes the means test.

Bottom line, SSI does not count as income on the means test, but does count as income in the broader sense if necessary.