Ch. 13 Debtor Can Exclude Social Security Payments From Plan

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By Daniel Gill

A Chapter 13 payment plan wasn’t offered in bad faith because the debtor retained some Social Security for “savings,” a Georgia bankruptcy court held April 26 ( In re Ogden , 2017 BL 137831, Bankr. N.D. Ga., No. 16-12280-WHD, 4/26/17 ).

To rule otherwise “would render the (bankruptcy) code’s express exclusion of (Social Security income) ... meaningless,” Judge W. Homer Drake of the U.S. Bankruptcy Court for the Northern District of Georgia said.

He was referring to the bankruptcy law provision that specifically excludes Social Security payments from the definition of “current monthly income,” which must be factored into amounts to be paid into a Chapter 13 plan.

Ora Lee Ogden filed a Chapter 13 case on Nov. 11, 2016. Chapter 13 allows individuals receiving regular income to obtain debt relief while retaining their property. To do so, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three- to five-year period.

In her plan, Ogden said she would retain $920 a month of her $2,071 Social Security income for “savings for unforeseen expenses.” The plan provided that Ogden’s secured creditor (about $14,700 for home improvements) would be paid in full. Her unsecured creditors would get $8,000 over the life of the plan, for about a 20 percent return on those claims.

The Chapter 13 trustee objected on the grounds the plan wasn’t offered in good faith. He argued that Ogden did not explain why it was necessary for her to retain the $920 a month.

The court rejected the argument primarily because bankruptcy law excludes Social Security income from the definition of “current monthly income,” which must be considered when offering a Chapter 13 plan (11 U.S.C. §101(10A)(B)).

The opinion didn’t resolve one factor the trustee said contributed to the lack of good faith by the debtor. The court said it had inadequate information to decide whether the debtor’s full payment of the $14,000 secured home improvement loan, taken out less than seven months before the bankruptcy, was justified under the circumstances or reflected bad faith.

The court said it would have to consider additional evidence to make that determination.

Ogden was represented by Alex J. Dolhancyk, Jonesboro, Ga. The Chapter 13 trustee, Adam M. Goodman, Atlanta, appeared on his own behalf.

To contact the reporter on this story: Daniel Gill in Washington at To contact the editor responsible for this story: Jay Horowitz at

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