It was recently announced that those receiving social security would see an increase of almost 4% to their monthly social security checks in January, 2012. This is welcomed news for those receiving social security who have not seen an increase since 2009. And I believe some of my clients at Halcomb Singler, LLP, will be curious whether the increase in social security will in any way affect their current bankruptcy or a bankruptcy that they intend to file shortly.
The answer to this question depends on whether the bankruptcy has already been filed and what chapter has been or will be filed. For those filing Chapter 7 whom have already filed bankruptcy the change social security income will likely have no bearing on your pending Chapter 7 bankruptcy. The reason for this is because the social security increase will not take place until January, 2012. By that time if you have already filed a Chapter 7 bankruptcy you will have already attended your 341 meeting of creditors hearing and will likely have received a discharge of your debts or be well on your way to receiving that discharge.
If you are thinking about filing a Chapter 7 bankruptcy, but have not done so at this time the increase in social security may disqualify you for a Chapter 7, but I believe this will be the vast minority of people. As I have discussed in previous blogs about how it is determined whether you will qualify for a Chapter 7 or Chapter 13 bankruptcy, if the increase in social security will mean that at the time of the filing of your bankruptcy that you will have more than $100.00 left over at the end of every month after paying for your reasonable living expenses then you will no longer qualify for a Chapter 7 bankruptcy. However, social security income is not included in the means test, so the increase in social security will not be affected. The reason I believe even though it is possible that the increase in social security income may disqualify some, but not many, is that the increase is as a result of the increase in the cost of living. Therefore, it is important to evaluate your expenses carefully to make sure you are not underestimating expenses listed in your bankruptcy. In addition, the cost of medicare that is deducted from social security is also going up....so the near 4% increase will not net a 4% difference in income.
If you are currently in a Chapter 13 repayment plan and your plan has already been approved by the Court it is very unlikely that your payment will change. You should contact your bankruptcy attorney if you have questions. The same reasoning I used for Chapter 7 about your expenses and medicare having increased also applies to the pending Chapter 13 bankruptcy.
If you are contemplating Chapter 13 bankruptcy, the consequences in the raise of your social security will likely be an increase in your Chapter 13 payment equal to the net amount of your social security increase. Excess income, including social security income, is what Chapter 13 debtors must pay to the trustee each month according to their Chapter 13 repayment plans. Therefore, an increase in income will likely mean an increase in Chapter 13 payments....but not a large increase.
Overall, I believe that the increase in social security will have a very small impact on bankruptcy. Since the social security increase seems to be big news today and since it gets more and more difficult to think of things to blog about that are relevant in bankruptcy and/or money management I thought I would take advantage. Please leave a comment if there is something you would like me to address in a future blog posting and you might just give me my next idea for a blog. If you live in Carmel, Indianapolis, Noblesville, Tipton, Zionsville, Fishers, or the surrounding areas and are considering bankruptcy I would be happy to meet with you and discuss your options. Meeting with me does not mean you have to file a bankruptcy! However, I will go over your personal situation with you and answer your questions about bankruptcy without a fee. If you do decide you would like to file a bankruptcy our fees are flat amount (not hourly). If you would like to talk to me about bankruptcy at Halcomb Singler's office in Carmel give me a call at 317-575-8222 or click here.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
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