The first of July was a red-letter day for senior citizens considering whether to file for Chapter 13 bankruptcy. The Fourth Circuit Court of Appeals held in Ranta v. Gorman (In re Ranta), No. 12-2017 (July 1, 2013) that debtors who file for Chapter 13 bankruptcy are not required to list their Social Security income as part of their projected disposable income for purposes of the Chapter 13 means test.
In general, the Chapter 13 means test requires that debtors who wish to file Chapter 13 bankruptcy must make payments for 5 years – 60 months – unless their average gross income is less than the median income for similar households in the state. In the event that their average gross income is less than the median household income, they may make payments on a plan for only 3 years – 36 months.
For debtors, a shorter payment plan under Chapter 13 is better than a longer one. In fact, Chapter 13 debtors who fall below the median household income figure stand to save thousands of dollars and, literally, years of frustration, anxiety and stress. Thus, one of the critical questions in a Chapter 13 filing is whether a debtor’s projected disposable income exceeds the median household income for his or her state. This question, in turn, is dependent upon simple arithmetic: namely, adding up a debtor’s projected income.
Enter the Ranta decision. By excluding Social Security income as part of the projected disposable income calculus, the Fourth Circuit made it easier for Chapter 13 debtors to qualify under the Chapter 13 means test and, consequently, enter a 36 month plan rather than a 60 month one.
Want to find out more about Chapter 13 bankruptcy and the case law that may make easier – or more difficult – for you to successfully restructure your personal finances. The dedicated and experienced attorneys at the Dallas law firm of Fears Nachawati may be able to help you. For your free consultation, contact us today.