Select Page

2012_MLG_logo_icon_blue

FOR IMMEDIATE RELEASE

 

EXEMPT INCOME IN BANKRUPTCY CASES EXPANDED

Ruling expands Means Test exempt income beyond U.S. Social Security benefits.

RICHMOND, Va. — The U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division issued a ruling this week expanding the definition of what income is exempted from consideration when determining what type of bankruptcy an individual may file or how much they will repay.  Prior to the ruling, only Social Security benefits were exempt from calculation in the qualifying test, called the “Means Test.”  As a result of the ruling, retirement income from foreign governments may also qualify to be excluded from the qualifying test.

In the case In re McPhee, No.13036046-KRH, slip op. (E.D. Va. Aug. 26, 2014) the Chapter 13 trustee filed an objection to the debtors’ plan of reorganization on the grounds that the debtors failed to include income received from their Canadian Old Age Security (OAS) benefits, a Canadian government-sponsored retirement plan similar to the United States’ Social Security system. The trustee maintained the commonly held position that the Bankruptcy Code only permits the exclusion of Social Security benefits from the calculation of current monthly income.

Attorney Chad L. Edwards of The Merna Law Group, P.C., argued otherwise for the debtors. Edwards cited a treaty signed between the United States and Canada in 1981 and ratified by Congress in 1984 that provides for the equal treatment of each country’s social benefits. The court ultimately agreed that the treaty placed the foreign retirement benefits on an equal footing with Social Security benefits under bankruptcy law.

In his Memorandum Opinion, Judge Kevin R. Huennekens stated “that a Treaty in effect between the United States and Canada mandates reciprocal treatment of government retirement benefits between the two countries.”

“This case demonstrates the need to look beyond the bankruptcy code for guidance, even on issues that may seem fairly settled,” said Edwards. “I was told by many bankruptcy trustees that we wouldn’t win because the bankruptcy code was clear on the subject.  But the truth is that the bankruptcy code is only a small part of federal law. We, as attorneys, have to look at other federal statutes, cases, and even treaties in some cases to truly understand the law’s full application.”

To view the full Memorandum Opinion issued by the court in this case, visit http://divi.mernalaw.com/bankruptcy/virginia-bankruptcy-information-center/in-re-mcphee/.

About The Merna Law Group, P.C.: Established in 2003, The Merna Law Group is one of the premier bankruptcy law firms in Virginia. Winners of more than 35 Awards for Excellence over the past 7 years, their expert attorneys have represented thousands of clients in successful bankruptcy and divorce cases and are recognized as some of the best bankruptcy attorneys in the state. Firm founder and lead attorney, John G. Merna has also served as past President of the Tidewater Bankruptcy Bar Association. The Merna Law Group operates under the founding philosophy that meeting an attorney need not be an impersonal, confusing or judgmental experience for clients. The firm maintains offices in Virginia Beach, Newport News and Richmond. Learn more about The Merna Law Group, P.C. by visiting their website at www.mernalaw.com or calling them at 800-662-8813.

Contact: John G. Merna, Esq. Phone: 800-662-8813 Email: jmerna@mernalaw.com

 

REQUIRED BAR NOTICE: THESE TESTIMONIALS DO NOT GUARANTEE SIMILAR RESULTS.

 The Merna Law Group, Attorneys At Law, P.C. …kind and friendly from the start!5 Stars! “Everyone there was kind and friendly from the start and helped us with everything in a timely manner. They were never rude no matter how much we called or asked questions.” Reviewed by B.P. of Virginia Beach on Feb 20 . 
 The Merna Law Group, Attorneys At Law, P.C. Didn’t have to worry about anything!5 Stars! “Just keep providing the type of service you do. You business values are based off reliability and service. Today’s Law Offices just don’t offer that kind of experience. Didn’t have to worry about anything!!! Just being able to go on with my normal life and know that all my issues are well taken care of is a relief in itself.” Reviewed by A.P. of Virginia Beach on Mar 4 . 
 The Merna Law Group, Attorneys At Law, P.C. …overall experience was outstanding!5 Stars! “My husband and I were very happy with The Merna Law Firm. They are well organized, time manageable, and friendly. I was even able to bring my children with me if I needed to. In court, they stayed right there beside us and answered all questions we had. Our overall experience was outstanding and I am glad we were represented by the Merna Law Group.” Reviewed by A.M. of Suffolk on Mar 5 . 
 The Merna Law Group, Attorneys At Law, P.C. …debt free!5 Stars! “A friendly staff and outstanding attorney who helped me through a difficult time in my life. Thanks to everyone at the Merna Law Group who helped me move on to and new chapter in my life debt free!” Reviewed by M.F. of Norfolk on Mar 8 . 
 The Merna Law Group, Attorneys At Law, P.C. …very helpful and friendly!5 Stars! “Everyone at the office was very helpful and friendly. The attorney answered all of our questions and helped us through the entire process. He was also very helpful answering concerns that we had after the process was completed/over. Highly recommended!” Reviewed by M.E. of Virginia Beach on Mar 11 .