In a Chapter 13 bankruptcy the debtor’s monthly payments toward his or her debts are usually determined by the bankruptcy means test. The means test is a mechanical calculation that takes the debtors average monthly income and subtracts out allowable expenses. For most expenses such as food, clothing and utilities the amount of allowed expenses is a specific allowance. For some expenses such as taxes, mortgage payments, and child support the debtor’s actual expenses are used.
The Bankruptcy Code specifically excludes Social Security from income in the means test, and therefore most Chapter 13 debtors will not have higher payments, because they are receiving Social Security. There is another provision in the law however that allows the trustee to ask for higher monthly payments, if a debtor is spending unreasonably high amounts on his or her living expenses.
The question thus arises, what happens, if the living expenses are too high, but the debtor is paying for these out of Social Security. For example, what if a man spends $600 a month of his Social Security eating dinner every night in a nice restaurant, when the means test only allows him a $315 a month food allowance.
From what the courts have said the man will not have a problem. Social Security must still be subtracted in calculating how much income the debtor would have available to make Chapter 13 payments, if he or she was only incurring reasonable expenses.
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