Filing for bankruptcy is a very difficult time for many people. Things can get even worse when you have to worry about the status of your disability payments. Many people wonder if the government will touch their payments during the bankruptcy process. The short answer is no. However, there are some key factors you must consider when receiving disability after a bankruptcy filing. In this article, we will explain how filing for Chapter 7 bankruptcy affects your disability payments.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy wipes out any past or current debts you owe and prevents creditors from going after you. In an effort to compensate creditors, the trustee in charge of your property will sell any property that is not covered through Chapter 7 filing.
Can I Keep My Disability Payments?
After filing for bankruptcy, you may wonder how this affects any disposable income you receive, such as disability payments. Disability payments are given through the social security administration and are intended for living purposes. The court recognizes that most people on disability need these payments to live and they allow debtors to keep them. Unlike property that can be resold, payments cannot be touched by the bankruptcy trustee. Although the courts are in favor of debtors, there are some other factors that may affect your ability to keep payments.
Factors that may determine if you are eligible to keep payments include: the state you reside in; if you receive benefits from multiple sources; and your past or future disability payments.
Disability Payments From Multiple Sources
Each state has a specialized code that governs how disability payments from multiple sources are handled. The amounts vary by state and are all handled under Chapter 7 bankruptcy filings. A social security lawyer can interpret California law and talk to the trustee about exempting your payments.
All of your future Social Security Disability Income (SSDI) payments are also exempt from bankruptcy filings. Neither the trustee nor creditors will be allowed to go after them now or in the future.
Lump Sum Payments
Debtors may have received lump sum SSDI payments in the past or will receive them in the future. The Social Security Act allows debtors to file a motion to exempt their payments or have them automatically protected through the initial Chapter 7 filing.
The courts have ruled that SSDI is not property and cannot be handled as such by trustees. However, some regulations do apply. States have put certain dollar amounts on the amount of SSDI that can be exempt. This amount is meant to cover basic upkeep and living expenses. In this instance, speaking to a social security lawyer will help you file the necessary exemption documents.
Contacting A Social Security Lawyer
We’ve been helping disabled individuals in the Greater Los Angeles area, the Inland Empire, and Orange County get the disability benefits they need for years. Call Dr. Bill LaTour and his team today at 800-803-5090 or fill out our online form to schedule a free consultation.