Chapter 13 and disability

[AUProud]

I am 20 months into a 5 year plan in Georgia. I have filed for disability due to cancer issues. I called the para legal and asked her what would happen if I am approved for benefits and she stated that my entire lump sum back pay would go to the court for distribution to creditors and I would need to prove the need to keep the monthly payment. Any advice would be appreciated.

[LadyInTheRed]

If your income has been reduced and/or your expenses have increased since the date you filed BK and the changes weren't anticipated when creating your plan, then I would think those changes should offset your benefits. If you are awarded the benefits, I suggest you meet or speak with your attorney, not the paralegal, about how to proceed. The attorney should review your entire financial situation and how it has changed from what was anticipated in the plan. So, bring an updated list of income and expenses along with information on your benefits award.

[BNKRPTinNC]

My wife filed for SSD while in our 13. We were about half way thru our plan when she started receiving payments and a lump sum. As she had not been working for a year, or more, the amount of money we received in the lump sum payment and added to our gross income for the year did not exceed the yearly gross when we filed so I did not report it. As for the regular monthly payments, again all income added together did not exceed the initial gross income at time of filing. In fact we ended up having less spendable income but were able to complete the plan. Your situation may be different than ours but, in our case, I felt that as long as I was able to make the plan payments and did not make above what we had filed with I was not going to rock the boat.

[justbroke]

I would definitely make an appointment with my attorney and ask whether this "social security" benefit can be exempted or is otherwise exempt. I would also keep the SSI/SSDI/SS payments in a separate bank account to prevent any commingling or issues regarding commingled funds.

I also don't know how you are maintaining payments to the Trustee if you have a loss of income. If you depended / depend on income from employment, you'll need to deal with that as well.

[AUProud]

Talked to my attorney yesterday and found out that the trustee will likely take all or most of my lump sum and my monthly payments will go up as well. Not what I wanted to hear but we've got to work through it. I thought about dismissing the bankruptcy but it would be tough dealing with all the creditors again.

[despritfreya]

Assuming we are talking about Social Security Disability. . .

Please ask your attny to research this case:

In re Scott, 488 B.R. 246 (Bankr.M.D.Ga., 2013)

“Bankruptcy Court addressed objections to confirmation filed by Chapter 13 Trustee in two separate cases regarding the exclusion of social security benefits from the calculation of the Debtors’ “projected disposable income” pursuant to 11U.S.C. §1325(b)(1)(B). In both cases, the Debtors failed to include social security benefits they were receiving. In the Scott case, the Debtor also failed to include the social security benefits received by his non-filing spouse. The Bankruptcy Court overruled the Trustee’s objections in both cases, and determined that the social security benefits of either Debtors or their non-filing spouses should be excluded from the calculation of a Debtor’s “projected disposable income” pursuant to Section1325(b)(1)(B).” (Quoted from an article on the ABI web site.)

I do not know if the decision was appealed or if the other judges in your district follow it.

Des.

[justbroke]

Thank you Des for posting that. I was eluding that there have been cases where SS benefits are not income and are protected. The only time is when the debtor "voluntarily" chooses to use the SS income in a voluntary Chapter 13 in order to propose a feasible plan.

[kornellred]

The appellate courts in the Fourth, Fifth, Sixth, Eighth and Tenth Circuits have ruled that Social Security benefits need not be included in the mathematical formula for determining the average income of a debtor filing for debt relief under Chapter 13. So, if you live in one of the 24 states subsumed under those 5 circuits, the Chapter 13 trustee cannot object to this allowed omission.
My own guess as to why such omission could even be allowed in the first place is the fact that SS benefits are either of the retirement or disability category. While retirement benefits are a virtual lock, they cannot be classified as assured because death cancels the benefit, and Social Security law does not permit benefits to be included in an estate. As for disability payments, they are subject to revocation if the recipient's physical health improves to the point where gainful employment becomes at least possible. It seems that the difference of opinion amongst the various circuit courts centers around whether SS benefits should be regarded as probable in the long term of a Chapter 13 plan. Some of the courts have decided to eliminate the SS reporting because they recognize that in the long run things are just simpler that way. Like I said - my guess only.
If you file for Chapter 13 in any of the other 26 states and your total household income includes SS benefits, you must include it in the gross income calculation, which will obviously increase your calculated DMI. Your attorney is free to argue for it's exclusion, and the trustee can argue for it's inclusion, but only the BK Court itself can make the decision.

The US Trustee's viewpoint is that the lack of uniformity across the entire Chapter 13 spectrum is it's biggest flaw in terms of efficiency.