S. Beaulieu, Jr. v. Benjamin Ragos
700 F.3d 220
5th Cir.2012Background
- Debtors filed joint Chapter 13 petition and proposed plan in 2011, seeking to pay creditors from income while retaining most social security benefits.
- Schedule I shows $200 monthly social security included; actual SS receipts total $1,854 monthly, with $1,654 undeclared to creditors under the plan.
- Trustee objected to confirmation, arguing SS income must be dedicated to creditors and that nonconformity violated good faith.
- Bankruptcy court ruled that SS benefits are excluded from projected disposable income under the Code and Social Security Act, and confirmed the plan.
- Appeal questioned whether social security should be included in projected disposable income; Court affirmed the bankruptcy court’s decision.
- Trustee and creditors argued Lanning required inclusion; court held no change in circumstances warranted including SS in projected disposable income.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether social security benefits are included in projected disposable income. | Trustee: SS must be included in projected disposable income. | Ragos: SS benefits are exempt from income under the statute and not included. | SS benefits not included in projected disposable income; plan affirmed. |
| Whether the plan was proposed in good faith given SS income retention. | Trustee: retention of SS shows lack of good faith. | Ragos: plan complies with Code; retention of exempt SS cannot alone show bad faith. | Plan proposed in good faith; retention of exempt SS not a basis for bad faith. |
Key Cases Cited
- Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011) (excludes Social Security from current monthly income; supports exclusion from projected disposable income)
- In re Carpenter, 614 F.3d 930 (8th Cir. 2010) (SS benefits not property of estate under §407; reinforces exemption from bankruptcy process)
- Hamilton v. Lanning, 130 S. Ct. 2464 (Supreme Court 2010) (allows accounting for certain known future changes in income; but not to override explicit exclusions)
- In re Nowlin, 576 F.3d 258 (5th Cir. 2009) (disposable income presumptively equals projected disposable income unless substantial change in circumstances)
- Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011) (reiterates exclusion of SS from current monthly income; supports statutory interpretation)