The most recent amendments to the Bankruptcy Code (the 2005 Bankruptcy Abuse Prevention and Consumers Protection Act) has kept the Federal Circuit Courts and Bankruptcy Court busy – while leaving practitioners and Trustees at odds over certain critical issues including whether Social Security Income should be included in your budget (Schedule I).
In Baud, the 6th Circuit Court made it clear that Social Security Income should not be included in the Means Test – and by implication – should not be included in monthly budget calculations. In a subsequent decision here in the Eastern District of Michigan, the Tobias court agreed and debtor’s were allowed to exclude their Social Security Income in their monthly budget. The Baud and Tobias decisions were widely respected by local Trustees.
But – all bets are off with the recent decision of Mains v Foley (decided February 24, 2012) where a Western District of Michigan Bankruptcy Judge ruled that Social Security Income must be included in a debtor’s monthly income. The Mains Court based its decision on a subjective determination of “good faith” based on the “totality of the circumstances.” So – although Mains presents no “bright line” rule – this decision makes Social Security Income a factor in any Chapter 7 or Chapter 13 Bankruptcy filing.
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