Debtor Correctly Excluded Mother’s Social Security From PDI

Posted by NCBRC - March 6, 2018

Where the debtor lived with his mother and they shared all income and expenses, he correctly included her expenses and excluded her social security benefits in his projected disposable income calculation. In re Palcher, 2018 WL 481863, No. 7:17-bk-3938 (Bankr. D. S.C. Jan. 16, 2018).

Above-median debtor, Michael Palcher, proposed a chapter 13 plan to pay his mortgage directly and pay approximately 6.7% to unsecured creditors through the plan. The trustee objected to confirmation arguing that, because Mr. Palcher did not include his mother’s social security in his projected disposable income, the plan did not comply with section 1325(b) and was proposed in bad faith.

The court disagreed. Section 101(10A)(B) defines “current monthly income” as excluding social security benefits. “Projected disposable income” is based on the calculation of current monthly income and, therefore, likewise does not include social security benefits. Having concluded that Mr. Palcher correctly excluded that income, the court went on to make the dubious statement that it would follow that if his mother’s social security income is excluded, her expenses should also be excluded. Rejecting its own logic, however, the court found that Mr. Palcher and his mother functioned “jointly as a single financial unit,” and that, under the Means Test formulation, his mother’s expenses were therefore includable as being both reasonable and part of the “economic unit” made up of the two of them.

The court overruled the trustee’s objection to Mr. Palcher’s plan.

Palcher Bankr D SC opinion Jan 2018

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