In yesterday’s post, I discussed the definition of “Current Monthly Income” as set forth in Section 101(10A) of the Bankruptcy Code. Currently Monthly Income is used to determine whether someone is “abusing” the bankruptcy process by filing a Chapter 7 petition, when they (arguably) should be filing a Chapter 13 petition. The Current Monthly Income (or CMI) calculation does not include “benefits received under the Social Security Act.” This would obviously include Social Security benefits, such as those received at retirement. But would this apply to other sources of income that might emanate from the act? How about DUA or unemployment benefits? A Massachusetts Bankruptcy Judge recently said yes.
In this case, the married debtors excluded from their CMI the $1,010 monthly income the wife was receiving in unemployment benefits. The US Trustee objected and sought to dismiss the case, claming that the unemployment benefits should be included in the CMI calculations, and if the income was included, there would exist a presumption that the bankruptcy process was being abused (what we also refer to as the “presumption of abuse”). Debtors argued that the unemployment compensation was a “benefit under the Social Security Act” and that Social Security Act included received as unemployment compensation.
The US Trustee contended that the benefit was an “indirect payment” under the Social Security Act since benefits are ultimately administered by the individual states to those eligible recipients, and not the Social Security Administration. But the Court disagreed, noting that in other sections of the bankruptcy code, Congress did specifically limit its applicability to specific provisions of the Social Security Act. The Court noted “when Congress wished to limited the applicability of the Social Security Act, it did so by reference to particular sections.” In Section 101(10A), there is no such limitation.
Relying on an Ohio case, the Massachusetts court found that the plain meaning of 101(10A) required a finding that unemployment compensation, a benefit received under the Social Security Act, was excluded for the purposes of determining CMI.
- Storm Preparation: Payment Advices
- High Income Debtor Gets Chapter 7 Relief
- Filing Bankruptcy: Timing can be Everything in Chapter 13
- Median Income Figures Adjusted
- IRS Form 1099-C: Discharged Debt is NOT Income