In a published opinion, the Fourth Circuit affirmed the denial of confirmation of an above-median Chapter 13 debtor’s plan that proposed to pay off three recently purchased vehicles while paying unsecured creditors less than eight cents on the dollar. In Goddard v. Burnett, No. 25-1303 (4th Cir. Apr. 28, 2026), the court held that technical compliance with the disposable-income test under Section 1325(b) does not insulate a plan from the separate good-faith requirement of Section 1325(a)(3). This ruling creates a circuit split on this issue with the case of Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013).
[Read more…] about Fourth Circuit Holds Good-Faith Review May Consider Whether Secured Property Is Necessary for Above-Median Chapter 13 DebtorsAdoption Assistance Payments Excluded from Current Monthly Income
The debtors’ Adoption Assistance payments were “benefits received under the Social Security Act” and were therefore excluded from the calculation of their current monthly income. In re Isaacs, No. 18-1651 (Bankr. M.D. Pa. Aug. 26, 2019).
The above-median debtors proposed a 21% plan and the trustee objected to confirmation on the basis that they were not paying all their projected disposable income into the plan as required under section 1325(b)(1)(B). The dispute centered around the nature of the $2,325/month in benefits the debtors received under the Adoption Assistance and Child Welfare Act of 1980 (the Act). The debtors maintained that those benefits should be excluded from the calculation of current monthly income because they were benefits received under the Social Security Act (SSA). The Act was established under Title IV-E of the Social Security Act (SSA), under which the federal government created a fund to provide benefits to the states to assist families adopting special needs children. The monthly benefits the debtors received were not entirely made up of federal funds, however, but were comprised of 51.82% federal funding, 38.54% state funding, and 9.64% county funding. The trustee argued that the funds were not social security benefits under the definition found in section 101(10A)(B) of the Bankruptcy Code.
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