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The 10th Circuit EXCLUDES Social Security Income from Disposable Income

In a decision that conflicts with a recent Western District of Michigan Bankruptcy Court,  the 10th U.S. Circuit Court of Appeals ruled in Anderson v. Cranmer , 2012 WL 5235365 (10th Cir. 10/24/12) determined that Social Security income is not included in a debtor’s “disposable income.” Because it is not included in “disposable income” it cannot be included in a Chapter 13 debtor’s “projected disposable income.”

The Anderson Court  maintained that neither the ruling in Hamilton v. Lanning , 130 S.Ct. 2464 (2010), or the “good faith” requirement of Section 1325(a)(3) required that social security income be included in a debtor’s disposable income. The court stated, “Nothing in Lanning suggests a court may disregard the Code’s definition of disposable income in calculating projected disposable income. To the contrary, Lanning made clear a debtor’s disposable income is not only the starting point in calculating projected disposable income, but in most cases it is determinative.”

The Anderson court also rejected the trustees argument that the “good faith” inquiry was separate from the inclusion of Social Security benefits in the debtor’s disposable income. The court maintained, “When a Chapter 13 debtor calculates his repayment plan payments exactly as the Bankruptcy Code and the Social Security Act allow him to, and thereby excludes SSI, that exclusion cannot constitute a lack of good faith.”

The issue of whether Social Security income is included in a Chapter 13 debtor’s projected disposable income is currently on appeal in the 4th and 5th Circuits. In both cases, In re Ranta, No. 12-2017 (4th Circuit), and In re Ragos, No. 11-31046 (5th Circuit). Needless to say – more to follow on this hotly debated issue as it makes it way to the U.S. Supreme Court.

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