Bankruptcy is one of the best tools available for managing significant debt and easing financial worries, but it isn’t something you should take lightly. Filing for bankruptcy can affect many areas of your life in good and bad ways, so it’s important to consider its effects before taking the plunge.
One of the primary concerns that arise when considering bankruptcy is how it will affect your income. Bankruptcy requires giving up some control of your finances and in some cases, this will affect your income.
If you’re receiving social security benefits, you likely have questions about how bankruptcy will affect your income. Should you be concerned about social security income if you file for bankruptcy?
In general, social security benefits are exempt in bankruptcy cases. This is a federal law, so it doesn’t matter where you live when you file for bankruptcy. As an exemption, the bankruptcy court will not gain access to your social security benefits and cannot take them as part of your bankruptcy case.
However, this doesn’t mean your benefits will be completely unaffected when you file for bankruptcy.
One of the most important things to consider when filing for bankruptcy and determining how it will affect social security benefits is the type of bankruptcy you’ve chosen. Chapter 7 and Chapter 13 bankruptcy can impact social security benefits differently.
If you file for Chapter 7, you’ll be required to report any income you’ve received in the six months leading up to filing. This includes your social security income, but your risk for having to turn those benefits over to the court is relatively low.
The only way your social security benefits can be taken from you when filing for Chapter 7 is if they are combined with other income. This is something to consider if your social security income is deposited into a bank account that includes other funds.
In Chapter 13 bankruptcy you get to keep your assets as long as you commit to an ongoing repayment plan. The plan is based on your income, which means social security can be used to calculate your financial situation, but those benefits cannot be used to repay your creditors. This means if you rely solely on social security as your income you might not qualify for Chapter 13.
The same rules apply for those who received social security benefits in a lump sum, but again, commingling funds can change your situation. The best way to avoid problems with social security income when filing for bankruptcy is to ensure those funds are deposited into a separate bank account.
If you’d like to learn more about social security, in general, check out this information from the Social Security Administration.
Protecting social security income is one of the reasons it’s so important to work with an experienced bankruptcy attorney when filing. He or she can assess your situation and determine if anything above and beyond the basic protections needs to be done to protect your social security income.
If you have questions about social security income and how if filing for bankruptcy can affect it, we can help. For more information or to speak to someone about your situation, contact the Bankruptcy Law Office of Robert M. Geller at (813) 254-5696 to schedule a consultation.
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