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Can You File Bankruptcy If You’re On Social Security Disability?

Can You File Bankruptcy If You’re On Social Security Disability?

File Bankruptcy, Social Security Disability
File Bankruptcy, Social Security Disability

File Bankruptcy

Since they cannot work, many persons filing for bankruptcy rely on their SSDI and SSI income. Filing for bankruptcy is often seen as a threat to receiving these funds. While filing for Chapter 7 bankruptcy, your Social Security Disability Insurance and Supplemental Security Income benefits are usually safe from garnishment. 

This protects them from being taken by the bankruptcy trustee. Since SSI is a federal program to help people meet their fundamental financial obligations, regular SSI benefits and a one-time lump sum SSI payment are permanently excluded.

Bankruptcy lawyers guard the residents’ property rights throughout the bankruptcy process. You can file for bankruptcy protection if you satisfy specific criteria. It is essential to point out that if you are an individual, you can file for bankruptcy under either Chapter 7 or Chapter 13 of Title 11 of the United States Code.

Can you keep SSD benefits in bankruptcy?

Medicare and Medicaid If you file for bankruptcy, your disability benefits will usually be safe from collection efforts. You should expect to keep getting your Social Security Disability Insurance (SSDI) payments if you’re already getting them.

There are very few circumstances in which disability payments will not be considered part of your bankruptcy estate and, therefore, not subject to claims by your creditors. The kind of bankruptcy you file (Chapter 7 or Chapter 13), the nature of your benefits (lump sum or periodic payments), and the number of your benefits will all play a role in this determination.

There is no universal rule on how bankruptcy will affect SSD payments; instead, it varies per chapter.

Chapter 7 SSD

Chapter 7 bankruptcy laws protect SSD benefits from creditors. Due to the apparent necessity of such benefits in maintaining one’s standard of living and that of one’s dependents in the event of the recipient’s inability to work, it is customary to allow the recipient to continue receiving them if they are receiving monthly disability payments under this heading.

SSD benefits are protected through bankruptcy in Georgia. Other examples include veterans’ benefits, unemployment compensation, public assistance, crime victims’ compensation, and disability help.

Chapter 13 SSD

If you file for bankruptcy under Chapter 13, you can keep all of your property if you come up with a plan to repay at least some of the money you owe to creditors over five to seven years. The amount of money you owe to your creditors will increase proportionately to the value of any assets that are not exempt.

Therefore, if the court decides that any portion of your Social Security Disability (SSD) benefits is nonexempt, you will be required to apply that amount to repay your unsecured debts. Additionally, you must include a disclosure of your disability payments in the budget for your bankruptcy case that you submit to the court. When calculating how much you can pay each month toward your debt, these payments will be taken into consideration.

Keep in mind

Although the laws of certain jurisdictions safeguard intermingled resources in a bankruptcy case, you should probably speak with an attorney about the requirements that apply in your state before beginning the process of filing for Chapter 7 bankruptcy protection.

Chapter 13 trustees may incorporate Social Security in repayment schedules. Even though removing benefits from Social Security in Chapter 13 bankruptcies has been upheld by multiple federal court rulings, it is necessary to resist any such attempt.

Lastly, Social Security and disability payments for veterans are safe from bankruptcy proceedings.

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