In re Bartelini, 434 B.R. 285 (Bankr. N.D.N.Y. 2010)

Social Security Income is Protected from the Reach of Unsecured Creditors

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Treatment of Social Security in Bankruptcy in the Northern District of New York Bankruptcy Court.

Social Security Income is heavily protected from your creditors outside bankruptcy. And Congress has repeatedly emphasized that it should remain protected from creditors inside bankruptcy as well.

An open question had remained in our district until very recently.

The question was Does social security income have to be included on schedule I in the calculation of disposable income?

The short answer is NO!

Chapter 13 Trustee’s Position

The basis of the Trustee's objection was that Chapter 13 Plans have not been proposed in good faith as required by 11 U.S.C. § 1325(a)(3) if they do not include Social Security Income on schedule I.

“It is the Trustee's position that if a debtor chooses to utilize the chapter 13 provisions, the debtor should do so with "honesty of intention" and not be allowed to shield social security income at the expense of creditors by using it for undisclosed purposes or the purchase of luxury goods or services rather than paying for daily living expenses. To do so, in the opinion of the Trustee, represents an abuse of the purpose and spirit of the Code and warrants a finding that the plan has not been proposed in good faith.”

The Honorable Judge Ruiz’s Decision in In Re Burnett

“In weighing the foregoing, this court finds that the Trustee's objection alleging per se bad faith for Debtors' failure to include social security benefits in their plans does not provide sufficient grounds to deny confirmation.”

The Honorable Judge Ruiz agrees with the Honorable Judge Davis’ decision in

In re Bartelini,434 B.R. 285 (Bankr. N.D.N.Y. 2010),

‘The Honorable Diane Davis concluded on the facts before her that the social security benefits were not included as part of debtors' projected disposable income. This court concurs with her decision in that case and believes its holding here is consistent with Judge Davis' well-reasoned opinion. While a court cannot compel the inclusion of social security income in calculating projected disposable income, this court finds nothing in the Code or the Social Security Act to suggest that a debtor's voluntary contribution of the same cannot be considered by a court determining whether or not to confirm a plan.”

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Reference Info:Decision | Federal, 2nd Circuit, New York | United States


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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