The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.
Minnesota Bankruptcy Case:
Carpenter v. Ries (In re Carpenter), 2010 WL 2977388 (8th Cir. (Minn.) 7/30/10) (Riley, J.).
Past and Future Social Security Benefits are not Property of the Estate
The Eighth Circuit Court of Appeals affirms the BAP and reverses the bankruptcy court to hold that the Chapter 7 debtor’s lump sum Social Security benefit, received prebankruptcy, is not property of the bankruptcy estate. Section 407 of the Social Security Act (SSA) provides that no Social Security benefits shall be subject to the operation of bankruptcy or insolvency law. The debtor received a lump sum distribution that he claimed exempt under § 522(d)(10) as the right to receive a Social Security benefit. The trustee objected to the exemption because the debtor had already received the benefit.
The bankruptcy court concluded that because the debtor had used the “federal” exemption, which did not apply to already-received funds, the trustee was entitled to the asset. The BAP reversed, rejecting the exemption analysis and finding that under the SSA, the benefit is not property of the estate. On appeal, the Eighth Circuit affirms the BAP. It notes the inconsistency between SSA § 407, and discusses cases that have addressed that inconsistency in several ways. It examines the Code and the interplay between Code provisions regarding exemptions and property of the estate in Chapter 13 and, by extension, in Chapter 7. Finally, it concludes that because SSA § 407 contains no qualifying language, it operates as a complete bar to the forced inclusion of past and future Social Security benefits in the bankruptcy estate.
Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.