If your are receiving Social Security Disability payments, or have received payments which you have saved, you may be able to keep this cash, and protect it during a bankruptcy. Social Security payments are exempt from being given up during a bankruptcy, but you need to make sure you handle these funds correctly to keep them. Given the financial consequences of handling this properly, it is highly advised that you discuss this situation with your attorney before filing for bankruptcy.
How to Protect your Social Security Payments during Bankruptcy
Bankruptcy laws vary state by state, so a local attorney should be consulted to give you guidance, but you may be looking for some idea of what they’ll tell you before you start. In general, you may hear that you should put the funds you received from Social Security into a separate bank account, completely separated from your other money. By isolating the funds like this, you will be to clearly point at an account and identify it as your Social Security funds.
If your Social Security payments are held in a common account which you use to hold other cash, and take money from regularly, it will be more difficult to demonstrate which funds in that account come from Social Security and which come from other sources of income.
Social Security in a Chapter 7
If you are filing Chapter 7 Bankruptcy, your goal is simply to protect your social security payments during the bankruptcy proceeding. You may have some saved cash that you want to hang on to (and not give up during the bankruptcy), and you may also have future payments coming in which you want to protect from garnishment. You may also have questions about how Social Security payments affect your income and whether you qualify for bankruptcy.
Speak to a local bankruptcy attorney about these concerns to make sure you keep as much of your money as possible during the bankruptcy, and protect your future income as well. By properly identifying what savings and income come from social security, your attorney may be able to help you keep all of it in tact through your filing. Gather up all of the information you can about your Social Security payments and bring it with you to your free case evaluation.
Social Security in a Chapter 13
Unlike a Chapter 7, Chapter 13 Bankruptcy will establish an ongoing payment plan between you and your creditors. Your Social Security savings should still be separated in order to protect it during the initial bankruptcy proceeding, but you may also need to continue saving your future payments in that separated account. Your SSDI payments will also impact your ongoing income, which will effect what kind of payment plan you can afford!
As in a Chapter 7, be sure to gather up all of the information you have regarding your Social Security payments and take a free case evaluation with a local bankruptcy attorney. Handling your Social Security payments in a Chapter 13 is potentially more complicated than during a Chapter 7 due to the fact that you will be continuing your payment plan for a significant time, rather than only needing to protect the funds during the filing procedure.
Social Security Payments after Bankruptcy
If your attorney is able to protect your Social Security payments through your bankruptcy, you should be able to rely on your Social Security checks after your bankruptcy. This is critical to get right, as your Social Security checks will help you afford every day expenses after bankruptcy, and help you with the important job of rebuilding your credit history! Be sure to have a plan in place for how to protect your Social Security during and after your bankruptcy.