Wednesday, June 22, 2022

Will Filing Bankruptcy Affect My Social Security Disability

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Disability Payments In Bankruptcy

Social Security Disability Benefits and Bankruptcy | Cleveland, Ohio SSD Lawyer

If an individual is elderly, disabled or blind, with little to no income, they may receive assistance from the federal program, SSI. SSI disability payments assist those without the ability to normally live life, in ways that others can, to take care of themselves with food, shelter, clothing and other basic life necessities.

Filing bankruptcy does not take away SSI payments, since that income is necessary to take care of ones self. There are a number of ways that disability claims have to be proved before receiving the funds, and there are ways that the funds must be used to contain the abuse of this money from the federal government.

Social Security Benefits Are Exempt Property

Each state has its own set of laws regarding how much property you can keep when you file bankruptcy. Although you’ll get to keep most necessary household items and a modest car, there’s no guarantee that everything will remain yours. The primary role of the Chapter 7 bankruptcy trustee is to liquidate all of your non-exempt property and distribute the proceeds to your creditors. If your state says you can keep a particular item, you do so by declaring it “exempt.”

While your state usually decides what you can and cannot keep in bankruptcy, federal law says that all of your Social Security funds are exempt property. No matter what state you live in, you get to keep Social Security money.

Will I Continue To Get Disability Benefits If I File Bankruptcy

In short, yes. The rules for protecting ongoing disability payments â those you receive after filing bankruptcy â are much more straightforward than the rules that apply to benefits you received before filing bankruptcy. If youâre using federal bankruptcy exemptions, your ongoing disability payments are exempt under 11 U.S.C. Section 522. If youâre using your stateâs exemptions, your ongoing disability payments are exempt under 42 U.S.C. Section 407 and 38 U.S.C. Section 5301 .

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What Happens To My Social Security And Disability Assets By Bankruptcy Type

If your assets are determined exempt, you dont have to use them as part of the bankruptcy process.

If you file Chapter 7 bankruptcy and your assets were commingled or otherwise found to be non-exempt, you may have to turn over that money. It will then be used to pay off your unsecured creditors as part of the bankruptcy process.

If you file Chapter 13 bankruptcy and your assets were commingled, you may have to use some of that money as part of your repayment plan.

Disability Benefits As Income

Does Filing Bankruptcy Affect Employment?

When it comes to the means test, disability income other than from social security is included in the calculation for your monthly income and that may impact your eligibility for a certain type of bankruptcy. You have to disclose your private disability income on Line 10 of the Chapter 7 Statement of Your Current Monthly Income and again on Line 8h of your Schedule I. If you know that your private disability benefits will expire in the next 12 months, make sure you indicate when you are losing this benefit when prompted to enter any expected changes in your income on your Schedule I.

If you received a lump sum payout from your disability insurance in the 6 months prior to filing, this may result in a finding that you are not eligible for Chapter 7. That is not the end of the road, however, as the large lump sum payment you received was a one-time occurrence. In other words, the fact that you received a lump sum disability payout in the 6 months before your bankruptcy is filed does not automatically disqualify you from filing a Chapter 7 bankruptcy.

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How Bankruptcy Affects Your Disability Check

If youre receiving Supplemental Security Income or Social Security Disability Insurance , you probably qualify for Chapter 7 bankruptcy.

SSI is a federal assistance program for the poorest Americans funded by general tax revenues. Its designed to help blind and disabled individuals with little or no income, even if theyve never worked. Social Security Disability Insurance, also known as SSDI, covers disabled individuals who cannot work any longer due to a disability. If you worked 5 in the last 10 years and paid into Social Security through FICA taxes, then youre covered.

Those who file bankruptcy while receiving a monthly disability check may worry the SSA will reduce or terminate their benefits.

While this concerns reasonable, we want to put your mind at ease. The short answer to the question, How will a bankruptcy filing affect my disability check? is simply this: It wont.

Questions About Bankruptcy And Social Security Meet With A North Carolina Bankruptcy Lawyer

Bankruptcy is often a necessary process, but it has many intricacies that are confusing to a layperson. When you have a seasoned North Carolina bankruptcy lawyer on your side, you can be assured that all aspects of your finances, including your social security benefits, are considered in your bankruptcy. Your attorney can discuss how your benefits might impact your bankruptcy filing and allow you to make the decisions that need to be made. Call 855-206-0052 or use our convenient online contact form to receive your free no-obligation bankruptcy consultation with a North Carolina bankruptcy attorney at King Law Firm.

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How Social Security Benefits Are Treated In Bankruptcy

by Admin | Apr 4, 2022 | Uncategorized |

If you receive Social Security benefits , or Social Security Disability Insurance benefits , you cant afford to pay all of your bills, and you are contemplating bankruptcy, you need to be aware of how these benefits are treated in bankruptcy. But before we discuss how these benefits are treated you should consider whether bankruptcy is even necessary in your situation, or whether it is in your best interest. Before you determine if bankruptcy is right for you, it is important that you understand the different bankruptcy options.

There are two common bankruptcies for consumers, Chapter 7 and Chapter 13. A Chapter 7 bankruptcy is often referred to as a Fresh Start bankruptcy because it discharges most types of unsecured debt within about 90 days of filing bankruptcy . Most people whose only source of income is SS and SSDI benefits, easily qualify for a Chapter 7 bankruptcy. Fortunately, this is generally the cheapest, quickest, easiest of the two bankruptcy options.

To summarize very basically, if:

  • Your only income is SS or SSDI benefits and
  • You cant afford to pay all of your bills and
  • You arent bothered by creditors contacting you about your debts and/or suing you for those debts and
  • You arent concerned about your credit score: then
  • QUIT paying the debts that arent necessary to live , save your money, and dont file bankruptcy.

    However:

  • If the stress of debt collection and possible lawsuits bothers you or
  • Losing Disability Benefits Commingled With Other Funds

    Download Your “Social Security Statement” Prior to Filing for Disability

    The primary role of the Chapter 7 trustee is to find funds to pay to creditorsand the trustee won’t agree that you can keep certain property without being convinced that you’re entitled to do so. For instance, if you received a lump sum disability payment before filing your caseor even monthly payments that you didn’t spendyou will have to provide evidence proving that the funds were from a disability payment before you’ll be able to protect the balance using a federal or state exemption.

    So why is this a problem?

    Most people deposit all of their money into one bank account. This practice of placing funds from different sources into one account that creates a common problem faced by many filersbeing able to prove which funds in the pool are disability funds. Once the two sets of funds mix and you make withdrawals, it can be difficult, if not impossible to meet the evidentiary burden. The trustee will likely claim that mixing different funds destroys the ability to exempt the money.

    To help avoid this issue, consider dedicating an exclusive account for the disability funds.

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    What If My Disability Benefits Are From A Source Other Than Social Security

    Social security is not the only source of disability income. Specifically, you may receive disability income pursuant to either a short-term disability insurance policy or a long-term disability insurance policy. These policies are either provided by your employer or you can purchase one on your own. Generally, this type of disability income is treated very similarly to federal social security disability benefits in bankruptcy, but there are some important differences.

    Are My Social Security Benefits Safe In Bankruptcy

    Social Security benefits provide needed living expenses for people who are no longer able to work or have retired. As such, generally creditors are not able to garnish the benefits away from you, like they could wages. The exceptions are for taxes you owe, unpaid child support and federal student loans. The majority of creditors, however, including credit card companies, utility companies, medical providers, and other creditors will not be able to touch your Social Security benefits.

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    Social Security And Bankruptcy

    Now that you understand the basics of Chapter 7 and Chapter 13 bankruptcy, its easier to understand what happens to Social Security benefits in bankruptcy.

    Bankruptcy laws vary from state to state.

    The best part:

    The federal government has made one important part of the bankruptcy process consistent.

    Whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, Social Security benefits are considered exempt property across the nation.

    Lump-sum payments of Social Security funds, such as payments for retroactive benefits, are usually also exempt.

    That means:

    The bankruptcy trustee cannot take Social Security payments as part of the bankruptcy. You do have to prove the funds are Social Security funds, though. Thats where things get a bit tricky for some people.

    What Is The Difference

    Does Bankruptcy Affect Social Security and Disability ...

    If you choose the Minnesota list:

    • Private disability insurance payments are exempt in bankruptcy, and you will not have to turn over the payments to your creditors

    If you choose the federal list however:

    • Payments from a private disability insurance policy are only exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

    Under law 11 U.S.C. Section 522 a court could decide that private disability insurance payments are more than is necessary for your support, and order you to turn over some or all of them to your creditors.

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    When You Have To Pay Back Social Security Overpayments

    Unless you receive money from the government yourself, such as social security benefits, you may not realize how often mistakes are made. In 2015, the Social Securitys inspector general reported disability overpayments totaling $16.8 billion over a 10-year period. Many people are overpaid by the government. If this happens to you, its just a matter of time before the government comes back to collect those funds. When youre living on social security benefits, and your expected to pay back large sums of money you didnt expect to have to pay, this can cause a real hardship on you and your family.

    Some government debts are nondischargeable in bankruptcy, but as long as there is no fraud involved, Social Security overpayments are not one of them. In Chapter 7 or Chapter 13 bankruptcy, the debt you owe to the Social Security Administration, , can be wiped clean. If you received a large amount of money from a social security overpayment and cant pay it back contact a Debt Advisors bankruptcy attorney for more information.

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    Sep Can I File Bankruptcy If My Only Income Is Social Security

    If your only income is Social Security or SSD, you can file bankruptcy. But you may not have to.

    If you do not plan on going back to work, you may not need to file bankruptcy because you are considered to be judgment proof. That means that while your creditors can sue you and obtain a judgment, they may not be able to collect anything from you.

    Even if you are judgment proof, you may still want to file a Chapter 7 or Chapter 13 bankruptcy. If you have secured debt, such as a mortgage or car payment, and you are behind on your payments, Chapter 13 may give you the ability to bring these secured debts current, while still getting rid of your credit card or medical debt.

    If you have some real or personal property that is not considered exempt in your district, you can protect that property from creditors by filing a Chapter 13 and paying at least a portion of your unsecured debt.

    There are some social security recipients, who are judgment proof and have no non-exempt assets, but still want to file Chapter 7 bankruptcy. The primary reason is that they want to stop the phone calls, bills and demand letters.

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    How Chapter 7 And Chapter 13 Bankruptcy Work

    Most consumers file one of two types of bankruptcyeither Chapter 7 or Chapter 13. Here are a few of the differences between the two.

    • Chapter 7 bankruptcy. In this chapter, you get to wipe out many, or all, of your debts. In return, you might have to turn over some of your property to the bankruptcy trustee who will sell it and use the proceeds to repay your creditors. You don’t have to turn everything over, however. State and federal law allow you to protect certain types of property. To qualify for Chapter 7 bankruptcy relief, you must pass something called the “means test,” which looks at your income and expenses.
    • Chapter 13 bankruptcy. If you earn too much to qualify for a Chapter 7 discharge, you might have to file for Chapter 13 bankruptcy instead. In Chapter 13 bankruptcy you’ll keep all of your property and pay into a three- to five-year repayment plan. You’ll need to demonstrate that you have sufficient income to make your monthly plan payments.

    How Much Does Filing For Bankruptcy Cost

    Applying for Social Security Disability Benefits. Stage 4 Appeals

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    We believe that attorney fees should be reasonable, transparent, and simple to understand. As a result, our pricing is fair, competitive, and most importantly, no-nonsense. We understand that a meaningful attorney-client relationship is built upon trust. Therefore, we will never charge you a penny more than what we quote you. Guaranteed.

    Schedule a free consultation to receive your quote.

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    Federal Law Protects Social Security Funds In Bankruptcy

    Social Security benefits are exempt and therefore protected in bankruptcy, so you can keep your Social Security benefits if you file for bankruptcy, regardless of where you live. However, it’s a good idea to maintain your benefits in a separate account because once commingled with other funds, it can be difficult to prove that the money came from Social Security benefits rather than another source.

    Will Bankruptcy Affect My Social Security

    Bankruptcy can be a powerful tool for debt relief. If you are considering bankruptcy, but you receive Social Security benefits, there are some things you might want to be aware of. According to federal law, Social Security benefits are exempt in bankruptcy cases. Both the Social Security Administration as well as bankruptcy courts uphold this. However, there are some situations in which your benefits may be affected.

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    Consult A Bankruptcy Law Firm

    Social Security and bankruptcy can be a complicated mixture.

    The same can be said for disability and bankruptcy.

    There are rules to help people protect certain types of Social Security and disability benefits.

    Even so, it is imperative everything is set up correctly.

    A bankruptcy law firm or bankruptcy attorney can look at your specific situation. They can give you advice based on your circumstances. They can also determine if your specific Social Security and disability money should be exempt or not.

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    Ensuring Social Security Payments Are Protected In Bankruptcy

    St. Louis Park Bankruptcy &  Social Security Disability ...

    There are a few things you should remember if you are filing for bankruptcy and all or part of your income comes from Social Security payments.

    You must be able to prove the money you have is from Social Security, which can be difficult if your finances are co-mingled. What this means is if you receive SS payments and they are deposited into an account that also receives money from other income streams, it could complicate things and increase the odds a creditor will try to access that money.

    Keep in mind, the protection from confiscation of your Social Security money does not apply to debts you have to the IRS or the government. The IRS can seize your money if you owe back taxes.

    If youd like to know more about how IRS debt is handled differently than consumer debt, check out this information from the IRS.

    Laws regarding bankruptcy and Social Security can be confusing and in some cases, a creditor might try to take advantage of your situation. A bankruptcy attorney can prevent this from happening and can answer any questions you have about Social Security and bankruptcy, or about bankruptcy in general.

    To learn more or to speak to someone about your situation and how your income sources affect filing for bankruptcy, contact the Law Office of Robert M. Geller at 813.254.5696 to schedule a consultation.

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