Will I Lose SSDI Payments if I File for Bankruptcy?

Sustaining a serious injury or being diagnosed with a debilitating medical condition not only leaves a person in need of income, but it can also result in long-term financial difficulties. Accordingly, disabled adults who apply for Social Security Disability Insurance (SSDI) benefits, or who are already receiving SSDI benefits, may end up considering personal bankruptcy if their debts become unmanageable. Given that SSDI recipients must show that they have a medical condition that is expected to last for at least one year (or to result in their death) and that the medical condition prevents them from engaging in substantial gainful activity (SGA), SSDI recipients often need extensive medical care. And as most Americans know, medical care across the country can be extremely costly, even with good insurance.

If you are in this situation, it is important to know that, in general, you will not lose your SSDI benefits if you file for bankruptcy. The way in which your SSDI benefits will impact your bankruptcy case may depend, however, on the type of bankruptcy for which you file. Our national disability benefits attorneys can explain in more detail, and we are here to answer any questions you have about your particular circumstances.

Social Security Benefits Are Typically Protected 

When a person files for individual bankruptcy under Chapter 7 — a liquidation bankruptcy — all of their assets that are not categorized as “exempt” under federal or state law (depending on the state where the bankruptcy case is filed) must be liquidated so that creditors can be repaid. However, in general, benefits administered through the Social Security Administration (SSA), including both SSDI benefits and Supplemental Security Income (SSI) benefits, are typically exempt.

In other words, you should not anticipate that SSDI benefits you have already received, or will receive in the near future, could be subject to liquidation. Here is what the law says:

“Generally, Social Security benefits are exempt from execution, levy, attachment, garnishment, or other legal process, or from the operation of any bankruptcy or insolvency law.”

SSDI Benefits Could Have Other Bankruptcy-Related Impacts 

While your Social Security disability benefits are unlikely to be liquidated in a Chapter 7 bankruptcy (and no assets are liquidated in a Chapter 13 bankruptcy), the amount of SSDI benefits you receive could affect your eligibility for Chapter 7 bankruptcy.

The best way to determine any potential impact of your SSDI benefits in a bankruptcy case is to discuss your particular financial situation with an attorney who handles disability benefits and bankruptcy law.

Contact a National Disability Benefits Lawyer for Assistance 

Struggling with finances can make issues pertaining to your disability benefits seem even more fraught. It is important to remember that an individual bankruptcy filing likely will not impact your SSDI benefits, but it is nonetheless important to discuss the specific details of your personal circumstances with one of the experienced national SSDI benefits lawyers at the Law Offices of Stephen Barszcz. We can answer any questions you have about disability benefits and bankruptcy, and the relationship between the two of them. Contact us today to learn more about how we can assist you.

Source:

ssa.gov/OP_Home/rulings/oasi/41/SSR79-04-oasi-41.html