Retirement, Apply and Suspend, Full Retirement Age Application, Questions on what to do!

I am reaching the age at which I must give serious consideration to the age at which I should apply for retirement benefits from social security. I have worked since age 16 paying FICA taxes with every pay check. I really would like to start to collect back on what I paid in as soon as I can, but is that a good idea?

Luckily, I have had a job I enjoyed working, and therefore had sufficient funds so that I did not need to consider an election of social security benefits at age 62, and have been able to wait to the threshold of my 66^th birthday.


My spouse worked at a very good job until she was 64 years of age. She is now approaching 65 years of age.


The issues that now face me are two: Take benefits at age 66? File for benefits at age 66 and suspend?
Wait to age 67 and file? Wait to age 70?


I have written in a previous blog discussing this issue, but because it now affects me, I have decided to revisit the issue.


The first consideration is do we (my wife and I) have sufficient income to supplement the lower benefits received under a file and suspend action? If we do not, it simply becomes a decision to file at age 66.


To file and suspend, you must reach your full retirement age (FRA). You cannot suspend benefits prior to reaching FRA. You should check your FRA because it is a moving target (an excellent site- www.ssa.gov/myaccount). For people born between 1943 and 1954, FRA is 66 years.


Suspending benefits means to ‘stop sending me checks’. I will contact you at a later date to initiate payment. By suspending benefits, benefits increase by approximately 2/3% for each month between FRA and age 70 (there is no benefit to suspend benefits after age 70). You earn approximately 8% a year by delaying receipt of benefits. Also, you do not need to defer collecting for an entire year in order to earn monthly increases. The big difference between not filing for benefits and waiting and filing for benefits and then suspending benefits, is that if you change your mind and have suspended benefits, you can ask to have the suspended benefits paid. They will be paid at the rate that had been due you at your FRA, you lose the increase in benefits that accrued during the suspension period.


If I can afford to pay my necessary living expense, during a suspension period, there is a real benefit to suspend benefits for some period of time.


What is hoped to be gained by a file and suspend strategy for my wife and I is a means to start spousal benefits for her while allowing my retirement benefits to continue to grow. The idea is once I reach FRA to apply and suspend retirement benefits, than my wife, at her FRA, has an option to collect spousal benefits on my account. Spousal benefits allow my wife to collect benefits based upon my working record, while my benefits continue to grow. The rules require that a party file and suspend before consideration of spousal benefits become an issue. A party cannot delay filing and have his/her spouse then claim spousal benefits on the non-filers account.


Since my wife worked numerous years, for this to work for us, she would have to wait for her FRA. If my wife had not worked, or worked at low paying jobs, etc., so that her own earning record supports minimal benefits at her retirement, then she could at 62, 63, etc., up to FRA, participate in the suspend and file scenario.


(There needs to be serious consideration to the benefit the wife will receive in her own name if she is under her FRA and wants to claim spousal benefits. If based upon her own work record, her retirement amount is higher than the spousal benefit, she will receive her own benefit and not the spousal benefit. She has also locked in her benefit amount by her early retirement.)


When my wife reaches FRA, based upon my prior filing and suspension of benefits, allows her to file and suspend her benefits and then claim spousal benefits on my account. Spousal benefits are paid and both accounts will earn interest until retirement benefits are claimed, or age 70 is obtained.


At this point I think the correct decision for my situation is to apply and suspend benefits. If I need the money later, I can request accrued payments, if not I can take advantage of the increase benefits.

Cuts to SSDI proposed to pay for the Highway Trust Fund

Who is John Thune and why does  it appear that he dislike disabled persons?

John Thune is senator from South Dakota and a Republican.  He has responsibility to try to address the shortfall in the Highway Trust Fund.  In an attempt to prevent the Fund from going bankrupt, he along with Orrin Hatch (R-UT), have introduced two amendments to partially pay for the bill by cutting Social Security Disability Insurance (SSDI) benefits for people who also receive Unemployment Insurance (UI) benefits.   Senator Thune’s proposal would deem that an individual has performed Substantial Gainful Activity in any month that he or she receives UI.

How does this save money for the Highway Trust Fund?  The proposal would mean any month during which a person receives unemployment compensation, that month could count as a waiting period month, and an SSDI claimant receiving UI would be denied at having substantial gainful activity.  This would delay both SSDI cash benefits and Medicare health insurance for workers who become disabled.
In other words, if a claimant receives unemployment benefits and applies for SSDI, that claimant’s disability onset date could not be set during any month in which the claimant received unemployment benefits.  The claimant, who may have to wait for over an year for a hearing on his disability claim and who is unable to work, would be forced to choose between receiving of unemployment benefits, or pushing his/her disability onset date further into the future.  If you disability on-set date is delayed obviously your ability to obtain Social Security Disability income and Medicare benefits are concurrently delayed into the future.
Senator Thune has no understanding of the economic problems faced by disabled people trying to obtain benefits through the social security system.  They have little or no income.  Some have had to rely on Unemployment Benefits to sustain themselves during the Social Security Disability process.  The process can take years before the system finally decides that the worker really is disabled.
Some may argue that it is not fair for a claimant to claim benefits under both systems.  Such arguments miss the point that there is a 5 full month waiting period from the date a claimant is determined to be disabled before he/she becomes capable of getting any benefits.  So the way it works now, your disability payments do not even begin until 6 months after the “onset date” (the date the disability prevented you from working at a full time job). 
If your disability claim is approved, you cannot keep collecting unemployment benefits. 
If a Claimant’s initial claim is denied he/she get caught in the uncertainty of a disability process.  Each step has a longer waiting period, during which the claimant is unable to earn an income, unemployment insurance may be the only source of income for he/she can reach to pay for necessary living expenses during the months of delay. 
Memorandum 10-1258 by Frank A. Cristaudo, a former Chief Administrative Law Judge, says that  “[I]t is SSA’s position that individuals need not choose between applying for unemployment insurance and Social Security disability benefits.” 
“[A] person can qualify for Social Security disability benefits even though he or she remains capable of performing some work.”  Memorandum 10-1258, citing Social Security Ruling 00-1c and Cleveland v. Policy Management Systems Corp., 526 U.S. 795 (1999) (Social Security Disability claim and ADA claim can be concurrent).
Although funding the Highway Trust Fund is very important, it isn’t fair the place the burden of funding it upon the poor and disabled.

The Angry Judge

This blog is not intended to create any attorney client relationship between the author and anyone reading this blog.  The blog is solely the opinion of the author and carries no legal weight and should not be relied upon by any reader.  If the issue raised in this blog is of interest to the reader, she or he should contact an attorney of choice to discuss the issue.

There is no bright line that leads to an answer to questions raised in this blog. The blog is meant to give some light on a subject that happens but for which a remedy is seldom or ever pursued. It is the issue of the angry judge.

All most people hope for when they appear before the court is a fair hearing on their case, i.e. due process. Civil due process was described by Justice Brennan in Goldberg v. Kelly, 397 U.S. 254 (1970) @ 267.

Goldberg involved an action brought in the District Court for the Southern District of New York by residents of New York City who were receiving financial aid under the federally assisted program of Aid to Families with Dependent Children (AFDC) or under New York State's general Home Relief program. Their complaint was that New York State and New York City officials administering these programs terminated such aid without prior notice and hearing, thereby denying them due process of law.

The court wrote that “The fundamental requisite of due process of law is the opportunity to be heard.' Grannis v. Ordean, 234 U.S. 385, 394, 34 S.Ct. 779, 783, 58 L.Ed. 1363 (1914). The hearing must be 'at a meaningful time and in a meaningful manner.' Armstrong v. Manzo, 380 U.S. 545, 552, 85 S.Ct. 1187, 1191, 14 L.Ed.2d 62 (1965).” 267 “(a)nd, of course, an impartial decision maker is essential.” In re Murchison, 349 U.S. 133, 75 S.Ct. 623, 99 L. Ed. 942 (1955); Wong Yang Sung v. McGrath, 339 U.E. 33, 45-46, 70 S.Ct. 445, 451, 452, 94 L.Ed 616 (1950) “

In a social security hearing the ALJ is to be the inquisitor, and the impartial finder of fact. Can a judge who becomes angery toward the claimant, have that anger deny the claimant due process?

Suppose the claimant in a social security disability case is a person with some mental impairment, who is angry and has a history of having trouble controlling his emotions. At the hearing under questioning by the ALJ, the claimant becomes more and more up-set over the on-going questioning by the judge. He melts down and forcefully questions the Judge on why the judge continues to ask him the same questions. He is so upset that he has to leave the room and calm down. On return, the judge again starts questioning claimant. The claimant again becomes angry. Unfortunately, this time the judge is clearly angry and the two start yelling at each other, until the claimant leave the hearing room ignoring demands from the judge to return to his seat.

Because of the out-burst a second hearing was scheduled giving time for mental examination of the claimant. The same judge presided over the second hearing.

The decision is a denial of benefits. In the decision, there is a statement by the judge emphasizing the confrontation, and finding it showed a lack of credibility as it was not inspired by his mental condition, but merely a desire for gain, i.e. benefits.

Did the judge’s conduct deny the claimant due process and a fair hearing? Stated differently, can an angry judge be fair and impartial?

The first impulse is to look at who instigated the confrontation. It is easy to dismiss a challenge to the fairness of a decision when it was the party against who the decision ran being the person who instigated the confrontation, but is that fair?

Subtracting from the formulation, those incidents in which the party causes an angry confrontation with the judge for the sole purpose of raising the issue of due process or to delay the case or to get a different judge, we deal with claimant’s who did not plan to have such a confrontation, but because of impairment, serious or not, cannot keep emotion in check. We also deal with a judge, who is losing control over the courtroom and believes he/she has a right to angrily demand that the claimant conform his/her conduct. We have a claimant who may or may not be able to conform his conduct to the judge’s standard.

The result is a loud, angry, significant confrontation between a judge demanding the claimant return to his seat and conform his/her conduct and a claimant who believes s/he is being wrongfully attacked by the judge’s questions.

When the judge has become so angry that the judge loses all composure, it is hard to believe, no matter who initiated the confrontation that, given human nature, the claimant can receive unbiased treatment by that judge.

In support of that proposition, consider what the U.S. Supreme Court discussed in Ungar v. Saratire, 376 US 575 (1964). Ungar involved a contempt of court action against a party for actions performed before the Judge who ultimately held him in contempt of court. Although a different action than involved herein, it does have the component of a sole inquisitor, a judge, previously embroiled with the party being the same judge to adjudicate the contempt of court.

“The bias here is not financial but emotional. In re Murchison, supra, involved a closely related question arising in a state case. There the judge who served as the 'one-man grand jury' also had doubts about the way in which a witness testified before him. He charged him with contempt for refusing to answer. We reversed the conviction, saying, 'It would be very strange if our system of law permitted a judge to act as a grand jury and then try the (Page 601)very persons accused as a result of his investigations... A single 'judge-grand jury' is even more a part of the accusatory process than an ordinary lay grand juror. Having been a part of that process a judge cannot be, in the very nature of things, wholly disinterested in the conviction or acquittal of those accused. While he would not likely have all the zeal of a prosecutor, it can certainly not be said that he would have none of that zeal. Fair trials are too important a part of our free society to let prosecuting judges be trial judges of the charges they prefer.' 349 U.S., at 137, 75 S.Ct., at 625, 99 L.Ed. 942.

Judges are human; and judges caught up in an altercation with a witness do not have the objectivity to give that person a fair trial.

Criminal case or civil case, the premise remains the same. Altercations between the judge and the claimant should immediately raise a red flag. A claimant in many cases has his life, property, and happiness dependent upon a favorable ruling. An unfavorable finding may mean the person remains on the street, remains dependent upon family, and loss of whatever property that was owned.

With due regard to any argument social security may raise, first as noted in U.S. v Gantley 172 F. 3d 422 (6^th Cir. 1999) @431, “a defendant's 'right to have his case resolved by a particular tribunal will be subordinate to the larger interest of the public in 'fair trials designed to end in just judgment”. Complaints concerning crowded calendars, delays in the process, inefficiency should all fall to the wayside, assigning a new judge to complete the hearing is needed to protect the sanctity of the proceedings. Secondly, arguments that judges are used to this type of conduct. They are trained to handle such out bursts and basely arguments. The bottom line is as noted by Justice Douglas in Unger: “Judges are human; and judges caught up in an altercation with a witness do not have the objectivity to give that person a fair trial.”

This situation does not occur that often, but when it does, in my opinion, fairness requires that the judge hearing the case, recluse himself/herself, and has a new finder of fact, conclude the case and make the disability decision.

Dogs Dogs Dogs

Let’s talk about something other than Social Security—My Time at the Animal Humane Society

While working as an attorney, doing social security representation, I try to help people many of whom have been homeless.  It is hard and not always rewarding.  Try as hard as you can, sometimes you just don’t win!

When I volunteer at the Humane Society I help dogs, all types and sizes, many originally stray but all now homeless.   For the Dog on the adoption floor there always is a happy ending!

I have been volunteering at the Humane Society for years, first as a customer care person answering questions on the dogs up for adoption, and assisting in showing and exercising the dogs.  Lately, I have been engaged as a ‘dog walker’.  I take the dogs, one by one, for a  short run or long walk.  It is amazing how running with a dog, for even a short distance, changes the dogs personality, from robust to calm.

The dogs are always happy to see me, and no matter how bad a day I am having, it changes for the better when I interact with the dogs.  There are big dogs, fluffy dogs, small dogs, lap dogs.  There are mixed breeds and pure breads.  Every time I work there is a different variation.  Every time I volunteer, I find one or two whom for some reason, I find to be my favorite of the day.  I tend to be a big dog person, but I have seen many small dogs that turned out to be one of my favorites.

Interestingly every dog has a story.  He was a stray, found and rehabbed and now looking for a home; he was given up because ¨ owner lost his home, ¨ owner went into nursing care apartment without animals, ¨ owner died, ¨ rescued by the county, other state etc.  The saddest stories for me are the older dogs given up because the owner had no further ability to keep the dog—from being spoiled to hoping for a new home. L

I have experienced owners returning to see their old pet, who they could not keep because of a change of circumstance in their lives.  It is sad.

I presently have three dogs at home, all of which have come from the Humane Society.  The three living at home are all spoiled and part of the family.  Sometimes my wife chastises me for walking dogs at the Humane Society, when I could be walking our dogs, but I walk them every other day, I only get to the Humane Society twice or three times a month.

When I come home after a day at the Humane Society, my dogs meet me at the door and give me a thorough once over—they know I have been seeing other dogs during my absence.  Funny how that works!  (I also had a cat, but that is a whole different story with a whole different love story—mainly directed by the cat.  A cat can be fiercely independent or grossly loveable, but at his choosing.)

That was a refreshing break from blogging about disability law.  My next blog will be back to my writing trying to understand the actual practice and its nexus with the law and regulation.

Found Disabled, It May Discharge Your Student Loan!!

If you have a federal student loan, you may be eligible to have the loan cancelled through a “total and permanent disability” discharge.  With some exceptions, noted below, a discharge could mean you will not have to repay the student loan.

Federal student loans eligible for discharge include William D. Ford Federal Direct Loan Program loans, Federal Family Education Loan (FFEL) program loans, Federal Perkins Loans or Education Assistance for College and Higher Education (TEACH) grant service grant obligations.  If you have a loan through another loan programs or a private loan, check with the loan issuer since each program may have its own discharge rules. 

The Eligibility requirements, to have a loan discharged, are more restrictive than merely having social security find you disabled, and more difficult to meet.  To be eligible you must be unable to do any ‘substantial gainful activity’ (work involving significant physical and or mental activities) because of a medically determinable physical or mental impairment that has lasted 60 months, can be expected to last for 60 months, is expected to result in death, or is due to a 100% military service connected disability.

To attempt to gain the benefit of the program you must apply for a discharge http://disabilitydischarge.com/Pages?Users.aspx?id=35 and meet their qualifications.  You submit the application to your loan servicer, you must submit an application for each loan holder.  To find out who your loan servicer is, see http://www.nolo.com/legal-encyclopedia/who-is-my-student-loan-holder.html.

SOCIAL SECURITY AND BANKRUPTCY

CLAIMANT'S AWARD AND BANKRUPTCDY

There is a person for whom I can give advise but generally not take on as a client beyond the office conference and that person is one who comes into the office with a notice from social security indicating that s/he has received an overpayment and social security wants its money back

There are procedures available to try to deal with an overpayment (defined at 20 CFR § 416.537 – note possibility of a surviving spouse being liable for an overpayment received my deceased spouse). A claimant can challenge the existence of or the amount of an overpayment by a timely request for reconsideration. A claimant can request a waiver if: he or she is without fault and the requested adjustment would not defeat the purpose of Title XVI (SSI); that allowing the adjustment would be in good conscience and equity, or the adjustment would impede efficient or effective administration of Title XVI because of the small amount involved.

The test for being without fault is an all factor test, in my experience, weighed in favor of a finding of fault. If the request for waiver of re-payment is denied, a request for reconsideration can be filed. If that is done within 10 days of the denial, benefits can continue. By the way, if you lose on reconsideration and request a hearing, collection on the overpayment can resume from on-going benefits.

A lot more can be said about the foregoing, but that is not the purpose of this blog, this blog deals with the nexus of two areas of the law in which I practice, social security and bankruptcy.

Bankruptcy and Social Security

The big problem with the client who comes into the office with a large overpayment, is that s/he, they, do not have funds either to pay on the overpayment or for attorney’s fees. I have had clients with a large overpayment who could borrow money from friends or relatives to pay the cost of a Chapter 7 bankruptcy (in the appropriate case I see no reason why a fee only Chapter 13 filing would not work). I try to explain the cost of not filing with the cost of filing a bankruptcy.

The reason I bring up the issue of bankruptcy, is that the overpayment can be discharged. There have been numerous court decision and clearly, absent fraud on part of the debtor, Social Security Administration’s claim for overpayment is dischargeable and not protected from operation of the bankruptcy law. The decisions finding that the SSA is not protected, tend to base their decision on 42 USC § 407(a). It provides:

“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.´(italics added)

The courts have had no trouble construing this to mean that it is in the law to protect ¹ recipients from “losing benefits to creditors, not to protect the federal fisc from bankruptcy of recipients,”² or the SSA from a right of recoupment.

A good example is the case of Lee v. Schweiker, 739 F.2d 870 (3^rd Cir., 1984). In that case the SSA had argued that the language in the law, to-wit “none of the …rights existing under this subchapter shall be subject to…operation of any bankruptcy…law,” provided protection from any modification of the obligations of recipients to repay an overpayment. The Lee court found that the language did not show any intent to protect the SSA, rather it provided protection to the recipient of benefits from creditors, here SSA. It protects recipients from the loss of benefits, by either contract or legal process. The court in dicta, dealing with the issue of recoupment, noted that when dealing with social security overpayment, the courts have held that the benefits that constitute the overpayment were not paid contractually under social security law, and that the obligation to repay an overpayment is a separate debt subject to the ordinary rules of bankruptcy.

As to benefits taken prior to filing bankruptcy, which funds were used to pay on the overpayment, social security was allowed to keep the benefits received by it, because the amounts received did not “improve its position.’(see 11 U.S.C. §523(a)(2)(C))

Social Security is not left without any recourse. If SSA can prove fraud or misrepresentation on the part of the claimant in his/her receipt of benefits, it still has the rights/remedies set forth in 11 U.S.C. § 523(a)(2)(A)—where a finding of false pretenses, a false representation, or actual fraud may preclude discharge.

As with any creditor once SSA receives notice of a bankruptcy filing, social security must cease any collection efforts. The overpayment is a dischargeable debt and absent a finding of fraud, the amount claimant owes to social security will be discharged. When considering whether to file a individual case or a joint case take into consideration that the protection is for the named debtor, i.e. the claimant, and any third parties who have received benefit of the overpayment can still be required to repay.

It would seem that there would be no need for a case construing the same section of the social security act to determine if the bankruptcy trustee could take benefits due to the debtor for the benefit of creditors, but apparently not. In Minnesota the case to read is Carpenter v. Ries, 09-2897 8^th Cir. Court of Appeals, 2010. The Court of Appeals held that “§407 operates as a complete bar to the forced inclusion of past and future social security proceeds in the bankruptcy estate. See Carpenter II, 408 B.R. at 246-49; see also In re Buren, 725 f. 2d at 1086… We conclude § 407 must be read as an exclusion provision, which automatically and completely excludes social security proceeds from the bankruptcy estate, and not as an exemption provision which must be claimed by debtor.” (The number 3 footnote in the decision tries to reconcile § 407 and 11 U.S.C. § 522(d)(10)(A) – I leave it for your reading).

Assuming the claimant’s mental or physical condition has not improved since s/he was found disabled, upon a filing his/her monthly benefits should resume without deduction.

What about the case in which the attorney has represented a claimant before the Social Security Administration and won, but has yet to receive attorney’s fees?

Bankruptcy and Social Security Attorney's Fees

OMG! I just received notice that my client has filed bankruptcy and listed me as an unsecured, general creditor. Do I lose my fees? This turned out to be a very complicated issue without good answer!

As soon as the bankruptcy notice reaches SSA it will stop processing any process to adjudicate the attorney’s fees. SSA will not proceed during the time the automatic stay is in effect. If I have been listed as an unsecured creditor, SSA will not issue a decision approving or disapproving a fee based upon a fee petition or fee agreement during the stay. What if SSA has approved (certified) the attorney’s fees but not paid them to the attorney, or paid them out to the attorney?

The HALLEX indicates that the fees will be paid or not paid depending on instructions from the bankruptcy court. (I-1-2-3-C.3.) There was an old Program Circular that provided a discharge in bankruptcy stops payment of fees. Are they correct?

A case of interest is Binder & Binder v. Barnhart, 481 F.3d 141 119 Soc. Sec. Rep. Serv. 393 (2^nd Cir. 2007). In Binder, fees had been awarded to Binder under §406 (42 U.S.C. 406 Recognition of representatives; fees for representation before Commissioner). When the claimant filed bankruptcy and listed Binder’s attorney’s fees as an unsecured, non-priority debt, SSA demanded return of the paid fee.

SSA argued that upon claimant/debtor filing bankruptcy, the attorney’s fee debt was discharged. SSA based its argument upon a Program Circular (PC) “OCO 98-050 (the “Program Circular”… entitled “Bankruptcy and Attorneys Fees,” dated March 13, 1998). It provided that where a bankruptcy court discharges all of a claimant’s debts, including the representative’s fee, no fee may be authorized or paid by SSA (Binder @ 144-145). The document upon which the fee recovery was based, the PC, was an internal document and was prepared for use as training material.

The Court in Binder struggled to establish jurisdiction to even hear the matter. It finally decided that “(i)f one conceives of Binder’s claims (both constitutional and statutory) as arising out of property rights created by section 406 of the Act, then there probably is federal jurisdiction…Upon further review…we do indeed have jurisdiction …we now hold that Binder may invoke federal question jurisdiction…because, were such jurisdiction unavailable, it would be unable to obtain any judicial review of its claim under the Act.”@150.

After finding jurisdiction the court addressed the actions of SSA in demanding repayment of the attorney's fees. It held:

“We simply find no authority for the SSA to interpret and apply bankruptcy law or to enforce the orders of the Bankruptcy Court, and we hold that, in the absence of such authority, the SSA's unambiguous and limited duty was to certify for payment to Binder the firm's reasonable fee. The SSA has performed that function, and payment has been made to Binder. Whether Binder is obligated to pay the money to Delnegro by operation of bankruptcy law is a matter that does not properly concern the SSA. If Delnegro seeks to have the $1,200 returned to her, she must take this issue to the Bankruptcy Court, where Binder may again raise his due process, or any other, concerns with that court and may properly file an appeal from any future judgment of the Bankruptcy Court.”

There was no authority for SSA to demand the fees back from Binder. The claimant would have to return to Bankruptcy Court if there was a desire for a return of the funds. The funds would not be available to provide relief to creditors, since the funds are not part of the bankruptcy estate.

Binder & Binder appears to be quite litigious over issues it finds important to its social security practice. The issue of a bankruptcy filing on social security attorney’s fees was again center stage in Binder & Binder, P.C. v. Astrue, 848 F. Supp. 2d 230 (E.D.N.Y. 2012).

Binder had been successful and applied for and had its fee approved. The claimant/debtor filed bankruptcy and received a discharge. SSA advised Binder, pursuant to its “Hearings, Appeals and Litigation Law Manual” (“HALLEX”), that it had received Binder’s petition requesting a fee for the services but that since claimant had filed a bankruptcy petition, the SSA could not act on Binder’s fee petition absent authorization from the bankruptcy court.

We have moved for social security using a PC in 2007 to use of the HALLEX in 2012 to attempt to deny payment of fees for services when tangled with bankruptcy.

The Court indicated that in the Second Circuit, it

“has held that there is “no authority for the SSA to interpret and apply bankruptcy law or to enforce the orders of the Bankruptcy Court, and * * *, in the absence of such authority, the SSA's unambiguous and limited duty [is] to certify for payment to [the representative seeking a fee under 42 U.S.C. § 406] [its] reasonable fee,” Binder II, 481 F.3d at 152 (emphasis added). ⁴ The Second Circuit also held: “The Social Security Act by its terms does not authorize the SSA to enforce discharges in bankruptcy or make any determination as to attorneys' fees other than in accordance with its statutory authority to fix the fees of claimant's attorneys and to withhold and transmit the fees so fixed. The plain language of § 406(a)(4) admits of no exceptions in this regard.” Id. at 151 (emphasis added). According to the Circuit, “the SSA lack[s] *240 authority to deviate from the procedure outlined in § 406(a)(4) of the [Social Security] Act.” Id. at 152 n. 3.

Defendant fulfilled its duty to fix a reasonable fee under Section 406(a)(1) on July 26, 2010, when it determined plaintiff's reasonable fee to be eight thousand dollars ($8,000.00). Defendant's determination that plaintiff was entitled to a fee in the amount of eight thousand dollars ($8,000.00) was proper, notwithstanding the pendency of the bankruptcy proceeding, since it had an “unambiguous” statutory duty to fix a reasonable fee for plaintiff's services under 42 U.S.C. § 406(a)(1). See Binder II, 481 F.3d at 152. In determining plaintiff's reasonable fee, defendant recognized the amount of work completed by plaintiff and determined that plaintiff was entitled to payment for that work in the amount of eight thousand dollars ($8,000.00). See Id. at 151. “Absent a showing that the portion of the total past-due benefits to which [the plaintiff] is entitled is an unreasonable attorneys' fee, * * *, the SSA had a statutory duty under the [Social Security] Act to pay [the plaintiff] the certified fee. ” Id. (emphasis added). Accordingly, since there is no showing that an eight thousand dollar ($8,000.00) fee to plaintiff is unreasonable, defendant had a clear and nondiscretionary duty, with which it failed to comply without authority, to withhold the full amount of certified fees from the past-due benefits award to Landwirth and to pay that amount to plaintiff. “

It appears that SSA is to follow the law as it applies in the social security context completely independent of the rulings of the bankruptcy court. Once the automatic stay is lifted, it should complete is obligation to pay the approved fees. The issue of the propriety of the attorney keeping the earned fee, would need to be addressed, most likely, to the bankruptcy court.³ If SSA pays the fee to the claimant, unless the claimant voluntarily returns the money to the attorney, the attorney may be left without a remedy.

The cases listed in this blog are U.S. District Court decision, a level of determination that SSA may not adopt outside of the holding of the particular cases (Note my prior blog on social security’s non-acquiescence policy)

So this may be an issue bubbling below the surface in several jurisdictions outside of the Second (the Third and Eighth Circuits may bar payment based upon sovereign immunity). This is and will be an issue into the future. The law is not settled. Social Security provides sufficient time between award of benefits and actual payment of fees for a bankruptcy to be filed. The result as can be seen from SSA's own internal regulations, and case law, is unsettled.

There would seem that there is a need to question a prospective client, even if s/he poses a good showing of impairment, to determine the debt situation and if has spoken about bankruptcy, or seen a bankruptcy attorney.

Disclaimer: Blogs posted herein are intended neither as legal advice, nor do they create nor attempt to create an attorney-client relationship. The person viewing my blogs is admonished that an attorney-client relationship may only be created with the express consent to the parties to it. This blog is only the opinion of the author and are not expressed authority on any of the subjects discussed

1This appeal presents two technical issues of bankruptcy law. The first involves the extent to which the doctrine of recoupment allows the Social Security Administration (“SSA”) to continue recovering a pre-bankruptcy overpayment from the benefit checks of a debtor after she has filed a Chapter 13 petition, in spite of the automatic stay created by 11 U.S.C. Sec. 362. The second involves the application of the limitation on setoffs contained in 11 U.S.C. Sec. 553(b), known as the “improvement in position test,” to the situation in which the SSA agrees to recover an overpayment by means of monthly deductions from a beneficiary’s benefit checks, rather than by means of legal process. We are also confronted with the question of whether section 207 of the Social Security Act, 42 U.S.C. Sec. 407, renders SSA immune from the limitations placed on creditors by the Bankruptcy Code.” Lee v. Schweiker, 739 F.2d 870 (3^rd Cir., 1984)

2Lee v. Schweiker, supra @874

3“Does this exclude social security proceeds from the recipient's bankruptcy estate altogether?  In the bankruptcy context, at the commencement of a case, §544 of the Bankruptcy Code “authorizes a trustee to, in effect, capture property of the estate by exercising, as relevant here, all powers of a judgment creditor which obtains an execution that is returned unsatisfied.” Nothing in that section, §541, or §522, or any other provision of the Bankruptcy Code, makes express reference to §407 of the Social Security Act, or in any way trumps its provisions. The BAP held that since no provision in the Bankruptcy Code makes express reference to §407, and, without such express reference, that statute renders social security benefits, paid or payable, free from the operation of any bankruptcy law, a bankruptcy trustee has no authority to administer, as property of the bankruptcy estate, moneys paid to a debtor as social security benefits. “In other words, such proceeds are not property of the bankruptcy estate.”” Carpenter v. Ries (In re Carpenter), 408 B.R. 244 (8th Cir.BAP (Minn.))