The U.S. Bankruptcy Court for the Southern District of Georgia recently ruled on a case that questioned whether Social Security Income may properly be excluded from current monthly income, and hence not considered in projected disposable income in a proposed Chapter 13 plan contributions amount.
The Trustees Objection
The Chapter 13 Trustee objected to confirmation arguing that Richard P. Green’s (Debtor) Chapter 13 plan was not filed in good faith because Debtor is not contributing his Social Security Income into the plan. In Re: Richard P. Green, 17-11119. Further, Trustee argues that Debtor incurred several secured debts totally over $6,000 in the months immediately preceding the bankruptcy filing date. Id 3. These six creditors are listed in Debtor’s bankruptcy schedules as having claims secured by TVs, but Debtor omitted the date that each debt was incurred. Id. 2. Also, Debtor’s plan proposes to pay 0% to his unsecured creditors.
Debtor excluded his $975.00/month SSI from his income on Schedule I. He included a notation claiming that SSI is not “current monthly income.” Id. 2.
Over the 36-month period of Debtor’s Chapter 13 plan, he will retain $35,100.00 in SSI while paying his unsecured creditors nothing. Id 3. The Trustee argues that “the totality of the circumstances, in this case, requires a finding that Debtor’s proposed plan lacks good faith.” Id. 5. The Court must consider whether this plan has been proposed in good faith.
The Court’s Holding
The Bankruptcy Court held that it was not bad faith for Debtor to exclude his Social Security Income because “Social security benefits are expressly excluded from current monthly income[,]” in the Bankruptcy Code. 11 U.S.C. § 101(10A)(B).
Debtor’s exclusion of his SSI is expressly allowed by the Code and therefore cannot constitute a lack of good faith. However, the Court quoted Judge Drake in a recent case in the Northern District of Georgia stating “the ‘optics of the situation are not pleasant, and that does raise a spectre of unfairness’ to allow Debtor to amass such funds while paying a 0% dividend to his unsecured creditors.” Id. 9 citing In re Ogden, 570 B.R. 432, 438 (Bankr. N.D. Ga. 2017). The Court ultimately found that it “should not substitute its judgment for that of Congress.” Id. 10.
Trustee’s Other Good Faith Concerns
The Court was unable to make a determination as to the Trustee’s other good faith concerns because Debtor did not address the Trustee’s arguments. Id. 11. Trustee’s objection to confirmation was denied in part and a continued confirmation hearing set so that the Court can consider the remaining good faith issues. Id. 12.
The Takeaway
The issue is not Debtor excluding his SSI from his current monthly income calculation. The unresolved issues involve Debtor proposing to pay 0% to unsecured claims, and the secured debts incurred in May, June, and July, immediately before Debtor filed for bankruptcy on July 31, 2017.
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