Should we fight the courts to get a chapter 7 because of my SS?

[mom2crazies]

Krike! I was able to pull some other information that might be helpful, though. I think I will post it in the main bankruptcy thread, and then myself or others can add to it since this effects so many people.

[tcreegan]

Hi all, Hi mom2crazies,

This is because I live in UT, which is a "creditor friendly" state and they are ignoring the issue of social security being exempt and forcing people to go into a 13, even if they are in my situation.

Gotta clear the good name of the State of Utah, this whole issue is federal BK law, not the poor states fault.....

Why would it be excluded from the means test only to be included in the "ability to repay"? Why did they go to the trouble of excluding it for the means test? It just doesn't make sense to me.

The means-test is a sorting mechanism, trustee can see where you stand, gives them a path to follow; yes, no, maybe
The PDI (projected disposable income) of I & J is what you can actually afford to pay going forward. Given all your income sources, all your expenses, what is left-over each month.

I would have to agree w/ Des, most of the cases I have read say that Soc.Sec. is excluded from the means-test but included in I & J PDI ...to fight it would be an uphill battle, I wouldn't do it unless the attorney agrees to carry the case pro-bono

...whichever way you go, wish you the best!

Tom in Colo

[Pandora]

You'll be fighting uphill as Tom & Des point out - SSD / SSI is excluded from means but IS NOT when it comes to DMI unfortunately, our Ch. 13 is a prime example. Also - while we fell under median and qualified for a Ch. 7, due to assets we wanted to keep (all of them) and them being owned outright as well as wanting to strip our 2nd - we had to do Ch 13. Along those lines, while we qualified for a 36 month plan, our DMI did not allow us to pay into our base plan what was required in order to keep the assets (Ch. 7 liquidation) so our plan was extended out to 60 months. The option was we could either turn over assets to the trustee to liquidate in order to get the 36 month plan or keep them and extend it out to 60 months.

[newbie2]

Here is a new ruling coming out of the 6th Circuit in which one of the arguments by the trustee was because of the debtors exclusion of Social Security income. I know you're not in the 6th Circuit, but perhaps your attorney can read this apply the same arguments? (There were 3 separate arguments being considered in this case, one of which was Social Security payments and it looks like the appeals court ruled in the debtors favor.)

The case is Baud vs Carroll in the Eastern District of Michigan, with the appeal being decided at the 6th Circuit level.


An excerpt: III. CONCLUSION
To summarize, we hold: (1) if the trustee or the holder of an allowed unsecured
claim objects to confirmation of a Chapter 13 plan of a debtor with positive projected
disposable income, the plan cannot be confirmed unless it provides that all of the
debtor’s projected disposable income to be received in the applicable commitment period
will be applied to make payments over a duration equal to the applicable commitment
period set forth in § 1325(b); (2) the calculation of a debtor’s projected disposable
income (a) must exclude income—such as benefits received under the Social Security
Act—that are excluded from the definition of currently monthly income set forth in
§ 101(10A) and (b) must deduct “amounts reasonably necessary to be expended” as
defined in § 1325(b)(3) which, for an above-median-income debtor, means that the
debtor’s average monthly payments on account of secured debts calculated pursuant to
§ 707(b)(2)(A)(iii) must be subtracted if the debtor intends as of the date of confirmation
to continue making those payments; and (3) there is no exception to the temporal
requirement set forth in § 1325(b)(1) for debtors with zero or negative projected
disposable income. For the reasons stated above, we AFFIRM in part and REVERSE
in part the district court’s opinion and order, and REMAND the case to the district court
with instructions to remand to the bankruptcy court for further proceedings consistent
with this opinion.

[mom2crazies]

Because we are filing for chapter 7, The one thing that I did find in support is that they cannot use the "presumption of abuse" to make us file as a 13 because, "presumption of abuse" is based on CMI § 707(b)(2)(A)and (B) and my income is stated exempt from being counted as CMI according to USC title 11 chap1 § 101 (10A)(B) .

It will be very interesting to see what happens.

[mom2crazies]

Newbie - Thank you! It is the exact argument that I stated in response (we must have posted at the same time!). I forwarded it to my lawyer.

[willdufauve]

this may mean disclosing the reason for my disability, which is a mental illness and I rarely let other people know this.

I believe, based on longstanding experience within a relevant governmental agency, you are not required to disclose the specific nature of your disability. It would be improper for them to ask, or to treat you differently other than reasonable accommodation if you request it, I doubt they would risk that anyway, but if asked I would answer it's a private matter between you and your physician.

[despritfreya]

I believe. . .you are not required to disclose the specific nature of your disability. . .

This is correct, however, OP may want to disclose the nature of the illness "privately" to the UST as it may have a bearing on her ability to complete a Chapter 13 and goes to the totality of the circumstances in dealing with a 707(b)(3).

I had a case where there was a presumption of abuse (did not qualify under means testing) and one of the issues in defeating the presumption was the medical condition of my client. All information disclosed to the UST was kept confidential and, eventually, the UST agreed that we could overcome the presumption.

Des.

[willdufauve]

If she chooses to disclose because it' to her benefit, that's her personal decision alone to make.

[Pandora]

mom2crazies:

I did not have to disclose my disability to anyone but I did have to disclose how long I've been disabled and if it was expected to improve at any time. I believe the main area of concern would be how long your disability is expected to last. SSD reviews on average, every 3-5 years; you will get the folowing: a short medical review at year 3 or a more extensive medical review at year 5 - but it goes without saying that you can be reviewed at ANY time while receiving SSD regardless of timeframe.

I think it's great that you're planning on fighting the SSD/SSI issue with BK - but as the others have stated, its going to be one hell of a battle for you.


Good luck!

[Babybear]

wow... is social security income is exempt from the means test than I guess we have no income what so ever. So how does that work out when you file? I mean we have 50k debt and no income without social security. So how can they expect us to pay? I dont understand why these companies gave my mother so much credit due to a good credit score if that was he only income and its not even counted when considering payback? any thoughts

[newbie2]

Babybear, I'm confused by your question. You say "us" and yet you refer to your mothers income. Is the debt joint with your mother and are you both filing? As for your Mom, if all she has is SS income I am sure that would put her well under the means testing, so she should be good for a Chapter 7.

[Babybear]

Yes it is just my mother who is filing but I am also an authorized user on the account. I was surprised that soc sec income isnt included because when they first approve you for a credit line they ask what your income is and to include any source if you wish such as soc. sec and alimony etc etc. I guess we overestimated a bit on that part since I pay and contribute to the bills with my mother and so I included my disability income as well. Can they hold me in any way responsible as an authorized user or can?will they try to prove we lied a bit on the income that we gave to initially get the line of credit? For example I said she gets 40k a yr. and that was including my portion as well as savings because they said you can include these sources if you want. Do they try to prove you said that and dispute the bk if at the time of filing you state the source of income is social security only since the savings are now gone and they will most likely not count my income since I am not the primary card holder. This is my main concern. Will they try to prove fraud in overstating our income. Thank you for your answers.

[mom2crazies]

As far as the disclosure, I think I will disclose it to the trustee. I am having my dr write a letter to the trustee stating that medical expenses can fluctuate. Therefore, a high payment plan will not work if the case turns into a chapter 13. I was talking about disclosing it in public (like to the media, if it were to go farther than the first hearing). On my paperwork, the state psychologist put "Not expected" as far as improvement. I will be reviewed in 2012. However, I have had 2 more hospitalizations and a couple more diagnosis. I also have the support of my therapists and doctor.

Babybear: Social Security is exempt from the means test. However, if you file a chapter 7, you still have to fill out schedules I and J - which show your expenses vs. your disposable income. This is where the social security comes back into play (as part of determining your disposable income, as well as what your repayment plan would be - basically, rendering it not exempt). The reason they can still put you in a 13 is due to something called "presumption of abuse", if you look like you have disposable income, the court concludes that you can payback some or all of your debt and will dismiss the 7, or make you convert to a 13. Again, rendering it not exempt. Some districts are stating it is still exempt. Mine is getting around that. There are several laws in place that support the exemption of SS in bankruptcy, but the conflict arises on the schedules.

As far as your debt, Welcome to the immorality of the credit industry. They don't really care because they don't really check anything but a credit score. If you and your mother are on Social Security, The credit companies cannot garnish you or get a judgment via the SS Act Sec. 207 407. Furthermore, if you are just an authorized user, they cannot come after you. UNLESS you signed the application. I don't see how they can prove that you lied, since the application stated "all sources of income" (but, I would be cautious if you are in a "Creditor Friendly" state.) If the bankruptcy becomes an issue, I would let it drop because as long as SS is your only income and kept separate from any other income, the credit companies cannot come after you.

[Babybear]

Thank you for your reply and understanding of the situation but cant they try to go after the equity in the house if we don't file bk in response to a law suit?