Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
A debtor must include unemployment compensation when calculating “current monthly income” and “disposable income” in a Chapter 13 plan, the U.S. Bankruptcy Court for the District of New Mexico held ( In re Novak , 2017 BL 92598, Bankr. D.N.M., 13-16-11408 JA, 3/23/17 ).
Courts have reached divergent holdings, but the Tenth Circuit and the Tenth Circuit Bankruptcy Appellate Panel haven’t yet addressed the issue, Judge Robert H. Jacobvitz wrote March 23.
Jeffrey and Samara Novak filed for Chapter 13 protection, which allows them to obtain debt relief while retaining their property. To do so, however, the debtors must propose a plan that uses future income to repay all or a portion of their debts over a three- to five-year period.
Shortly after filing bankruptcy, Samara lost her job and began receiving $428 weekly in unemployment benefits from the New Mexico Department of Workforce Solutions.
The debtors argued that Samara’s unemployment benefits were received under the Social Security Act and therefore excluded from the debtor’s “current monthly income calculation.”
The Chapter 13 trustee disagreed.
Bankruptcy Code Section 101(10A)(B) provides that “current monthly income” excludes benefits received under the Social Security Act.
Although many courts have held that unemployment payouts are “benefits received under the Social Security Act,” others have ruled they must be included in the calculation of a debtor’s monthly income, the court said.
New Mexico unemployment benefits aren’t “benefits received under the Social Security Act,” the court concluded. As a result, the Social Security law exclusion doesn’t apply, the court said.
The Workforce Solutions Department administers New Mexico’s unemployment system and state law determines eligibility for benefits, the court said.
The Social Security Act leaves great latitude to the states to decide important issues such as the rate of tax and eligibility. Some limitations for a state’s unemployment compensation laws are found in the SSA, and others under federal law, the court said. The state pays benefits to claimants under and according to state law, the court said.
Michael Edward Lash, Christopher L. Trammell, P.A., represented the Novaks; Trustee Kelley L. Skehen represented herself.
To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)