Oftentimes, people surviving off Social Security disability payments have difficulty making headway against debts, and may opt to file bankruptcy.
Under most circumstances Social Security disability payments are not diminished or impeded by a bankruptcy filing. However, this isn’t ironclad – there are rare situations where disability benefits are considered assets.
Social Security disability is often protected in a bankruptcy filing, but there may be exceptions that apply – so many people wish to speak with an attorney to better understand their options.
If you want to get answers about whether your disability payments would be protected in bankruptcy complete the free form on this page. We'll connect you with a local bankruptcy attorney for a free case review.
Social Security’s protection from garnishment in bankruptcy is fairly well established. The Social Security Act features provisions protecting these payments, and in most cases bankruptcy laws will not overrule them.
Furthermore, federal law excludes Social Security disability benefits from Chapter Seven means test calculations. In other words, Social Security disability benefits aren’t counted as income for the purposes of determining whether you qualify for Chapter 7 bankruptcy. This can be useful to many fixed-income households as the debt dismissal of Chapter 7 is often a better fit than the monthly payment plans of Chapter 13.
However, as with many other avenues of law, state law differences and case circumstances could mean that SS disability payments may not always be exempt. Ongoing Social Security benefits are also taken into consideration when building a bankruptcy budget for purposes of Chapter 13.
There are certain situations in which Social Security disability payments may not be exempt from calculation in bankruptcy proceedings. For instance, lump sum payments and wealth accumulated through Social Security disability may not be exempt. In these cases, the law still protects the ability to receive Social Security disability, though depending on the state, received benefits may be considered in a bankruptcy settlement.
Social Security disability can be a big help as recipients move through the bankruptcy process, especially in Chapter 7. However, many people choose to consult with a bankruptcy lawyer beforehand to better understand the laws and how they apply. Complete the following form to get in touch with a local bankruptcy attorney for a free, no-obligation consultation.