Can I File for Bankruptcy Without My Spouse?
You may collect Supplemental Security Income (SSI) benefits if you are disabled, blind, or 65 years old or older and have limited income resources. Or, you may collect Social Security Disability Insurance (SSDI) benefits if you have a physical, mental, or emotional disability that prevents you from maintaining substantial gainful employment activity. Either way, government aid may still not be enough to keep you financially afloat. You may consider filing for bankruptcy given your current financial state, but you may question whether it is counterintuitive while you collect these benefits. Well, please follow along to find out whether Social Security benefits can be protected while your bankruptcy case is ongoing and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C., can help you keep these payments in your possession.
Will my Social Security benefits be protected during bankruptcy?
In short, you may rest easier knowing that your Social Security benefits will generally be protected during your bankruptcy proceedings. Particularly, for your Chapter 7 bankruptcy case, your appointed bankruptcy trustee may take your nonexempt assets, sell them, and distribute these liquidated funds among your outstanding creditors. However, your SSI or SSDI payments may be classified as an exempt asset that federal law does not allow to be paid to creditors. In fact, the Social Security Administration (SSA) is not supposed to honor any court order to hand over your benefits to your bankruptcy trustee.
As for a Chapter 13 bankruptcy case, you may not be mandated to use your Social Security benefits in your court-ordered three- to five-year repayment plan. In other words, it may be up to you whether you want to budget using more of your disposable income and subsequently dipping into this secondary income resource to afford a monthly payment. However, at the end of the day, it goes on a case-by-case basis as to whether the court will decide to use your means test form (which does not include your Social Security benefits) or income and expense forms (which do include your Social Security benefits) to determine how much you owe in repayments each month.
What is the best way to protect my benefits payments during bankruptcy?
There is one way that your Social Security benefits may be made vulnerable during your bankruptcy proceedings. And that is if you deposit these monthly payments into the same bank account as you do for your other income and savings funds. This may cause what is commonly referred to as commingling. Here, your bankruptcy trustee may be well within their right to access these bank account funds and give them to your creditors. Again, this issue may not be the same for a Chapter 13 bankruptcy case, as you are more in control of when you pay your creditors back. All of this to say, it is in your best interest to keep your benefits payments in a separate account.
Commingled money can still be traced
Keeping your funds in a separate account is generally the cleanest approach, but if your benefits are already mixed with other money, you’re not out of options. Funds retain their protected status so long as you can show where they originated; with bank statements that show deposits are from the Social Security Administration, you are typically covered.
The difficulty arises when benefits, wages, and savings have been moved through the same account for a year; it can be incredibly complicated to determine which dollars are which.
Your bank already protects two months automatically
Separately from bankruptcy, if a creditor garnishes an account holding directly deposited federal benefits, your bank is required to review the previous two months of deposits and leave an amount equal to those benefits available to you. This happens without you filing anything, and the bank cannot charge a garnishment fee against the protected amount. It is worth knowing if creditors are moving against you while you decide whether to file.
Contact our experienced New York bankruptcy firm today
We understand just how overwhelming all of this can be for you. So, if you have any remaining questions, please consult with a talented Rockland County bankruptcy attorney. The team at The Law Offices of Allen A. Kolber, Esq., P.C. is willing and able to provide you with legal assistance in any capacity. Contact us today to learn how we can represent you.
