Often elderly and disabled citizens worry they will lose their Social Security benefits if they file for bankruptcy. For many people, this monthly check is a lifeline. Those facing mounting debts due to unexpected medical expenses or the loss of a job, let fear of losing benefits prevent them from considering bankruptcy as a solution to improving their financial situations. An experienced attorney can alleviate your concerns and show you how filing for bankruptcy can help.
Can Creditors Garnish My Social Security Benefits if I File for Bankruptcy?
Whether you file for a Chapter 7 or Chapter 13 bankruptcy, creditors cannot take your Social Security money. Federal law states these funds are exempt from levy, garnishment, or assignment by creditors. Even if a court awards a creditor a judgment against you, they cannot intercept your monthly check. They are also not allowed to take the money after it is deposited in an account.
Do I Have to List My Social Security as Part of My Monthly Income?
You must list all forms of income when you file for bankruptcy, including your Social Security benefits. Retirement plans, pensions, and 401K accounts are all exempt but listing them on your bankruptcy paperwork is required. If the court thinks you have omitted information, they can reject your filing. In bankruptcy, Social Security and disability benefits are exempt from the calculations for the state’s means test. It determines how your monthly income compares to the state’s average. The means test dictates what kind of a bankruptcy a person is eligible to pursue. In some Chapter 13 bankruptcies, it determines the amounts of unsecured debt a person/couple is required to pay back to creditors. Since Social Security income is not counted toward the total household income, it is easier, in general, to qualify recipients for a Chapter 7 filing or to have them pay minimal amounts of debts back in a Chapter 13.
When Is Social Security Not Exempt?
While creditors cannot garnish your benefits before or during a bankruptcy, the IRS can withhold money from your monthly checks to cover back taxes, defaults on student loans, and non-payment of child support. However, a bankruptcy can keep these creditors at bay for a period of time.
Do I Have to Use My Social Security to Pay My Chapter 13 Re-Payment Plan?
If your monthly check is essential for paying necessities, you do not have to use it for re-payment. If you can contribute some of the funds toward the effort, you can finish your re-payment plan more quickly. Get advice from your bankruptcy attorney.
Sawin & Shea – Indianapolis Bankruptcy Attorneys
Worried about losing your Social Security or Disability benefits if you file for bankruptcy? Turn to the Indiana bankruptcy attorneys at Sawin & Shea to find the help and answers you need. With years of experience representing good people in bad financial situations, we can answer all your questions. Please do not hesitate to call us today at 317-759-1483 or send an email for a free consultation. We are ready to help.