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What Happens to My Social Security Benefits in Bankruptcy?


If you are struggling to pay your debt and you are considering filing a Chapter 7 or Chapter 13 case, you may be worried about what will happen to your Social Security benefits. This is particularly important for individuals who rely on their Social Security payments for their basic living expenses. The good news is that your Social Security benefits are typically protected in a personal bankruptcy filing.

When you receive your Social Security payments and you use the money to pay for food and other necessities, there may be a small amount leftover each month. It is possible that your creditors will attempt to garnish your account and seize these remaining funds. However, once you file for bankruptcy protection, all of your Social Security benefits are protected from creditors by exemptions. Thus, many debtors are surprised to learn that their benefits may actually be safer in bankruptcy than before the case was filed!

All bankrupt debtors are protected by the automatic stay as soon as their bankruptcy petition is filed. The stay prohibits your creditors from taking any collection action against you, including the garnishment. Even if the garnishment is already pending against you, the automatic stay brings it to an immediate stop. Additionally, the stay protects throughout the term of your entire bankruptcy case.

One of the most effective ways you can protect your Social Security benefits is to have your payments deposited into a dedicated bank account. In other words, the only funds that are deposited into the account are your Social Security benefits. This prevents you from comingling your protected benefits with unprotected funds, which also makes it easier for the bankruptcy trustee to determine what amounts are off limits.

If you are considering filing a bankruptcy and you need help determining which type of filing would be best for you, contact Fitzgerald & Campbell to schedule an appointment. We do not offer just one debt relief option, we don’t push you in one direction. If bankruptcy right for you, we will tell you. If it’s not, we will tell you that. If bankruptcy is your get-out-of-debt plan, it needs to be done right. It needs to be in the hands of experienced lawyers who have been there before. Contact us today!

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