Can Filing for Bankruptcy Affect Your Social Security Benefits?

Many people rely on social security benefits to pay their bills. Unfortunately, it can be difficult to make ends meet, even when you’re receiving regular SS payments. This is especially true if you experience a medical emergency or other financial crisis that was unexpected.

If you find yourself considering bankruptcy and you’re curious how filing would affect social security benefits, you aren’t alone.

Creditors are given a great deal of power when it comes to collecting money they are owed. They can contact you on the regular basis and take legal action against you. If granted permission from the court, they can even take money directly from your bank account or put liens on your property.

It makes sense that anyone receiving social security payments would be concerned that creditors could take this money from them. And if you rely on this money to pay your rent or mortgage, pay the cost of your utilities, and purchase groceries, this can be a frightening thought.

Do You Rely on Social Security for Day to Day Expenses?

When a person files for bankruptcy, the court takes into account the money needed for basic living expenses. A great deal of control is handed over to the bankruptcy trustee, but the person filing is granted permission to keep money that allows for a minimum standard of living. This includes social security benefits.

The restrictions regarding social security benefits are included in the Social Security Act. Section 207 of law states:

“The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”

The protection afforded in the law applies whether you are receiving Social Security because of retirement, disability, or the death of your spouse.

Ensuring Social Security Payments are Protected in Bankruptcy

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 you’d 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.