In Re Buren
Bankr. L. Rep. P 69,582, 4 Soc.Sec.Rep.Ser. 58,
Unempl.Ins.Rep. CCH 15,055
In re Danny Ray BUREN, Annie Laura Jones, Marian Frances
Henderson, Bob Dwaine Penovich, Anetricia
Katherine Woods, Guy T. and Maybelle
Adelia Drake and Wallace
Hornal, Debtors-Appellees,
Henry E. HILDEBRAND III, Standing Trustee, Chapter XIII, Appellee,
v.
The SOCIAL SECURITY ADMINISTRATION, Appellant.
No. 80-5427.
United States Court of Appeals,
Sixth Circuit.
Argued Oct. 21, 1981.
Decided Jan. 23, 1984.
Hal D. Hardin, U.S. Atty., Margaret M. Huff, Asst. U.S. Atty., Nashville, Tenn., Frank A. Rosenfeld, William Kanter, Linda M. Cole, argued, Civil Div., Dept. of Justice, Washington, D.C., for appellant.
C. Kinian Cosner, Jr., Nashville, Tenn., for Buren and Henderson.
Edgar M. Rothschild, Nashville, Tenn., for Jones.
Richard A. Dorris, Nashville, Tenn., for Penovich.
Ruth M. Kinnard, Nashville, Tenn., for Woods.
Robert H. Waldschmidt, Nashville, Tenn., for Drake.
Steve C. Norris, Nashville, Tenn., for Hornal.
Daniel C. Kaufman, Nashville, Tenn., Trustee.
Before KEITH and MARTIN, Circuit Judges, and ALDRICH, District Judge.*
ANN ALDRICH, District Judge.
In this appeal we must determine whether the Bankruptcy Reform Act of 1978,
The relevant facts are simple. Seven individuals who receive disability benefits under Title II of the Social Security Act,
I. THE BANKRUPTCY REFORM ACT OF 1978
Chapter 13 of the Bankruptcy Code enables an individual to develop a plan under court supervision for the repayment of debts over an extended period of time. In a Chapter 13 repayment plan, unlike a Chapter 7 liquidation, a debtor may retain his property by agreeing to repay his creditors.
The benefit to the debtor of developing a plan of repayment under chapter 13, rather than opting for liquidation under chapter 7, is that it permits the debtor to protect his assets. In a liquidation case, the debtor must surrender his nonexempt assets for liquidation and sale by the trustee. Under chapter 13, the debtor may retain his property by agreeing to repay his creditors. Chapter 13 also protects a debtor's credit standing far better than a straight bankruptcy, because he is viewed by the credit industry as a better risk. In addition, it satisfies many debtors' desire to avoid the stigma attached to straight bankruptcy and to retain the pride attendant on being able to meet one's obligations. The benefit to creditors is self-evident: their losses will be significantly less than if their debtors opt for straight bankruptcy.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 118 (1977), reprinted in [1978] U.S.Code Cong. & Ad.News 5787, 5963, 6079 ("House Report").
Incorporating recommendations from scholars, legislators and bankruptcy judges who worked under the aegis of the Bankruptcy Commission, the 1978 Code was a comprehensive rewriting of federal bankruptcy law. Its history makes clear that one of Congress' major goals was to expand the class of debtors eligible to utilize Chapter 13. Under prior law, only a "wage earner"--defined by the old Code as "an individual whose principal income is derived from wages, salary, or commissions"1--could proceed under Chapter 13. The new Code extended eligibility to any "individual with regular income,"
... is to expand substantially the kinds of individuals that are eligible for relief under chapter 13, Plans for Individuals with Regular Income, which is now available only for wage earners. The definition encompasses all individuals with incomes that are sufficiently stable and regular to enable them to make payments under a chapter 13 plan. Thus, individuals on welfare, social security, fixed pension incomes, or who live on investment incomes, will be able to work out repayment plans with their creditors rather than being forced into straight bankruptcy. Also, self employed individuals will be eligible to use chapter 13 if they have regular income....
House Report at 311-12, 1978 U.S.Code Cong. & Ad.News at 6269; S.Rep. No. 95-989, 95th Cong.2d Sess. 24 (1978), reprinted in [1978] U.S.Code Cong. & Ad.News 5787, 5810 ("Senate Report").
Consistent with
Nowhere does the Code state that this definition of estate was meant to repeal
Rather, the argument that social security benefits must be paid to the trustee regardless of the language of
The following property may be exempted under subsection (b)(1) of this section:
(10) The debtor's right to receive--
(A) a social security benefit, unemployment compensation, or a local public assistance benefit;
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(C) a disability, illness, or unemployment benefit.
Title II of the Social Security Act of 1935 established a social insurance program for wage earners and their dependents, to be paid out of a trust funded by the payroll taxes of wage earners and their employers. The current Title XVI, the product of the 1972 amendments that consolidated and expanded several previous programs, established a welfare program for needy individuals who are aged, blind, or disabled.
The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable, or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
The committee reports discussing Title II never mention the anti-assignment provision; as the government concedes, they illuminate the provision only by reaffirming that the purpose of Title II is to provide a minimum level of security against the economic uncertainties of old age. See H.R.Rep. No. 615, 74th Cong., 1st Sess. (1935); S.Rep. No. 628, 74th Cong., 1st Sess. (1935). Nonetheless, the Supreme Court has stated unequivocally that
When Congress amended Title XVI it explicitly incorporated
Your committee wishes to emphasize its strong belief that if the benefits which would be provided under this program are to meet the most basic needs of the poor, the benefits must be protected from seizure in legal processes against the beneficiary. Therefore, any amounts paid or payable under this program would not be subject to levy, garnishment, or other legal process, except the collection of delinquent Federal taxes. Also, entitlement to these benefits would not be transferable or assignable.
H.R.Rep. No. 92-231, 92d Cong., 1st Sess. 156 (1971), reprinted in [1972] U.S.Code Cong. & Ad.News 4989, 5142.
Other provisions of the Social Security Act further limit the payment of benefits to third parties and illustrate strong Congressional opposition to the diversion of social security funds. Title II benefits may be delivered to a third party under two circumstances only. Section 405(j) authorizes the Secretary of Health and Human Services to certify a representative payee "when it appears ... that the interest of an applicant entitled to payment would be served thereby." And section 406 permits the Secretary to transmit up to twenty-five percent of past-due benefits to an attorney who successfully represented a claimant before the agency. Title XVI also permits payments to representative payee and attorneys, but the Secretary may prescribe maximum attorney fees and may not deduct the fees from past-due benefits.
Both provisions espouse a policy much different from the high priority the Bankruptcy Code accords attorney fees in the payment of claims against a debtor's estate.
III. REASONING
Despite the failure of the Bankruptcy Act to include
The Supreme Court has held repeatedly that a "cardinal rule" of statutory construction is that repeals by implication are disfavored. Tennessee Valley Authority v. Hill,
two well-settled categories of repeals by implication--(1) where provisions in the two acts are in irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one; and (2) if the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate similarly as a repeal of the earlier act. But, in either case, the intention of the legislature to repeal must be clear and manifest....
Radzanower v. Touche Ross & Co., supra,
In deciding that
We think this states matters too broadly. Retaining
Turning to the second possible basis for repeal by implication, it cannot fairly be said that "the later act covers the whole subject of the earlier one and is clearly intended as a substitute ..." The district court accepted the trustee's contention that the new Code constitutes a "specific" statement concerning the rights of debtor social security recipients that overrode the more "general"
Indeed, the committees concerned with the Social Security system--the House Ways and Means and Senate Finance panels--played no part in drafting the new Code. The respective Judiciary Committees, on the other hand, possess no jurisdiction over social security and never seriously confronted the issue of benefit assignment. Thus the legislation they produced cannot reverse repeated expressions of congressional opposition to benefit garnishment. Consequently, the present legislative morass resembles the one untangled in Tennessee Valley Authority v. Hill, supra,
Finally, even if we read
... The question of whether existing statutes should be continued in force or repealed is, under our system of government, one which is wholly within the domain of Congress. When the repeal of a highly significant law is urged upon that body and that repeal is rejected after careful consideration and discussion, the normal expectation is that courts will be faithful to their trust and abide by that decision.
While the debate and discussion here was negligible, Congress made clear that it understood how the new Code would affect prior legislation when it assembled its list of voided or altered statutes. Nothing in the legislative history convinces us that the decision to omit
Presented with no compelling indications that Congress intended to repeal
IV. SUBSEQUENT LEGISLATION
Having failed in 1978 to explicitly state its desire to repeal
(b) No other provision of law, enacted before, on, or after the date of the enactment of this section, may be construed to limit, supercede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.
Pub.L. No. 98-21, Sec. 335(a).
The legislative history indicates without question that Congress intended to reverse decisions like those on appeal here. The Conference Report notes:
Based on the legislative history of the Bankruptcy Reform Act of 1978, some bankruptcy courts have considered social security and SSI benefits listed by the debtor to be income for purposes of a Chapter XIII bankruptcy and have ordered SSA in several hundred cases to send all or a part of a debtor's benefit check to the trustee in bankruptcy.
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While the provision is effective on enactment and is not to be applied retroactively, Pub.L. 98-21, Sec. 335(c), its language buttresses the Court's conclusion in this case. "Subsequent legislation declaring the intent of an earlier statute is entitled to great weight in statutory construction." Red Lion Broadcasting Co. v. FCC,
The decision of the district court is REVERSED. The bankruptcy court is directed to vacate the income deduction orders.
Notes
Honorable Ann Aldrich, United States District Judge for the Northern District of Ohio, sitting by designation
Act of July 1, 1898, ch. 541, Sec. 606 (amended 1938, 1950, 1959), formerly codified at
The Administration does not dispute that the Code nullifies any possible claim of sovereign immunity.
During a committee hearing on Chapter 13 reform the following dialogue took place concerning the anti-assignment provision of the Employees Retirement Income Security Act of 1974 (ERISA),
SENATOR BURDICK. What provision would you recommend to reconcile the provisions of the Employees Retirement Security Act of 1974 with section 4-503(c)(6) of the Commission's bill and 4-503(e)(5) of the judge's bill?
MR. CREEDON. This I guess has to do with the fact that ERISA provides that a pension benefit is not assignable and the Commission's bill would permit an exemption only with respect to that portion of the pension that is necessary for the bankrupt's maintenance.
I guess something could be put in the Bankruptcy Act to the effect that notwithstanding the provision in ERISA or otherwise, the trustee will be able to get at the excess.
Hearings Before the Subcommittee on Improvements in Judicial Machinery of the Senate Committee on the Judiciary, 94th Cong., 1st Sess. 678 (1975) (statement of John J. Creedon, American Life Insurance Association).
The list is identical in the House and Senate Reports:
--Foreign Service Retirement and Disability payments, 22 U.S.C. 1104;
--Social security payments, 42 U.S.C. 407;
--Injury or death compensation payments from war risk hazards, 42 U.S.C. 1717;
--Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601;
--Civil service retirement benefits, 5 U.S.C. 729, 2265;
--Longshoremen's and Harbor Workers' Compensation Act death and disability benefits, 33 U.S.C. 916;
--Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(L);
--Veteran's benefits, 45 U.S.C. 352(E);
--Special pensions paid to winners of the Congressional Medal of Honor, 38 U.S.C. 3101; and
--Federal homestead lands on debts contracted before issuance of the patent, 43 U.S.C. 175.
House Report at 360; Senate Report at 75, U.S.Code Cong. & Admin.News 1978, pp. 5861, 6316. (Emphasis added.)
Act of July 1, 1898, ch. 541, Sec. 6, 30 Stat. 548 (amended 1938), formerly codified at
... It permits an individual debtor in a bankruptcy case a choice between exemption systems. The debtor may choose the Federal exemptions prescribed in subsection (d), or he may choose the exemptions to which he is entitled under other Federal law and the law of the State of his domicile....
The reason and philosophy of the rule is, that when the mind of the legislator has been turned to the details of a subject, and he has acted upon it, a subsequent statute in general terms, or treating the subject in a general manner, and not expressly contradicting the original act, shall not be considered as intended to affect the more particular or positive previous provisions, unless it is absolutely necessary to give the latter act such a construction, in order that its words shall have any meaning at all
T. Sedgewick, Interpretation and Construction of Statutory and Constitutional Law 98 (2d ed 1874).