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Will Filing for Bankruptcy Affect Your Social Security Disability?

When you are receiving Social Security Disability (SSD) benefits, you may be understandably concerned that those benefits will be taken away from you if you file for bankruptcy. This issue affects a large number of people. One of the most common reasons why Americans file for bankruptcy is medical bills. In some cases, the health issues a person faces may be so severe that he or she needs to receive SSD benefits.

The good news is that these benefits will almost always be protected from creditors. However, there are rare cases in which disability payments will be classified as assets that are part of your bankruptcy estate — making them subject to claims from your creditors. This largely depends on whether you file for Chapter 7 or Chapter 13 bankruptcy, the source of your benefits, and whether those benefits come in the form of a lump sum or ongoing payments.

How SSD benefits will be handled in bankruptcy depends on the chapter being filed.

SSD benefits under Chapter 7

Both Social Security and bankruptcy laws shield your SSD benefits from creditors when you file for Chapter 7. If you have regular monthly disability payments in this category, you will usually be allowed to keep them, as you likely need these benefits to support yourself and any dependents you have while you are unable to work.

In Georgia, SSD benefits are just one example of public benefits protected during bankruptcy. Other examples include veterans’ benefits, unemployment compensation, public assistance, crime victims’ compensation and any other aid to disabled persons.

SSD benefits under Chapter 13

In a Chapter 13 bankruptcy, you get to hold on to all your property so long as you pay back at least a portion of your debts in a repayment plan. Any nonexempt assets increase the amount you must pay your creditors.

Therefore, if the court determines any portion of your SSD benefits is nonexempt, you will be required to put that amount toward your repayment of unsecured debts. In addition, your disability payments must be disclosed in the bankruptcy budget you provide to the court. These payments will be considered when determining how much you can afford in monthly repayments.

For further guidance on what you can expect to happen to your Social Security Disability benefits when you file for bankruptcy in Georgia, meet with an experienced bankruptcy attorney at Jeff Field & Associates. Give us a call at 404-381-1278 or contact us online to schedule a free initial consultation.

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