Social Security Income Not Included in Projected Disposable Income

Posted by NCBRC - October 24, 2012

In an important victory for debtors, the Tenth Circuit today found that social security income is not included in the calculation of projected disposable income and that its exclusion cannot support a finding of bad faith. Anderson v. Cranmer (In re Cranmer), No. 12-4002 (10th Cir. Oct. 24, 2012).

The trustee argued that while social security income is not included in disposable income under section 101(10A)(B) it should be included in the calculation of “projected disposable income” under section 1325(b). The court disagreed, reasoning that “[t]he mere placement of the adjective ‘projected’ in front of the words ‘disposable income’ does not imbue the term ‘disposable income’ with different substantive components.” The court noted that the exclusion of social security benefits from the grasp of creditors in bankruptcy is supported by similar protections included in the Social Security Act.

The court also dispensed with the trustee’s attempt to align this case with Hamilton v. Lanning, 130 S.Ct. 2464 (2010), stating that there was no change in the debtor’s income by reason of the exclusion of social security benefits. In fact, the court found that Lanning reconfirms the rule that disposable income is the starting point for calculating projected disposable income.

Finally, the court stated the rule that “[w]hen a Chapter 13 debtor calculates his repayment plan payments exactly as the Bankruptcy Code and Social Security Act allow him to, and thereby excludes SSI, that exclusion cannot constitute a lack of good faith.”

NACBA filed an amicus brief in this case.

This issue is pending in the Fourth, Fifth and Ninth Circuits as well. See In re Ranta, No. 12-2017 (4th Cir.); Beaulieu v. Ragos (In re Ragos), No. 11-31046 (5th Cir.); Drummond v. Welsh, No. 12-60009 (9th Cir.). NACBA filed amicus briefs in those cases.

Cranmer Opinion



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