Does Bankruptcy Affect Social Security Income?
According to statistics from the Social Security Administration, on average, nearly 67 million Americans will receive Social Security benefits every month in 2023. In Georgia and across the United States, qualifying retired workers, people with disabilities, dependents, and survivors receive Social Security benefits to cater to their daily living and medical expenses.
However, if you're facing financial distress and considering filing for bankruptcy, it is important to understand how it affects your Social Security income. At Pytte Law, I'm dedicated to offering experienced legal counsel and reliable advocacy to clients in bankruptcy and debt relief-related matters.
As a seasoned Georgia bankruptcy attorney, I can explore your available debt relief options, determine whether you qualify for bankruptcy, and enlighten you about how this affects your Social Security benefits. Pytte Law proudly serves clients throughout Savannah, Hinesville, Statesboro, Richmond Hill, Effingham County, McIntosh County, and Long County.
Bankruptcy's Effect on Social Security Income
Bankruptcy is among the promising solutions for individuals, families, and businesses facing financial hardship to achieve debt relief. Depending on the option you choose, bankruptcy can help eliminate some of your qualifying debts and offer you a deserved financial fresh start. In addition, there are various bankruptcy exemptions that protect your property and allow you to keep some assets and earnings in bankruptcy.
As mentioned earlier, bankruptcy exemptions allow you to keep some of your assets, income, and personal property from the bankruptcy trustee. Without these exemptions, the trustee would have gathered and sold your property to repay your debts. Some common bankruptcy exemptions in Georgia include:
Homestead exemption – protects about $21,500 of equity in personal property or real estate ($43,000 for couples)
Motor vehicle exemption – protects about $5,000 in equity in your cars
$500 of value in jewelry
About $300 in the value of individual personal items, including clothing, animals, furnishings, crops, household goods, appliances, musical instruments, and books ($5,000 total)
$10,000 of personal injury compensation
Wrongful death damages
Social Security benefits
Retirement accounts and pensions
From the list above, Social Security benefits are exempt property in bankruptcy. Hence, you will be allowed to keep your Social Security income upon filing your bankruptcy petition, notwithstanding the amount.
Bankruptcy Exemptions and Chapter 7
Chapter 7 bankruptcy helps you eliminate most of their general unsecured debts, such as credit card debts, personal loans, and medical bills. The Georgia court will appoint a trustee to manage your case and collect and sell your nonexempt assets. The net proceeds will be distributed to some or all of your creditors. As mentioned earlier, Social Security income is exempt from bankruptcy.
Bankruptcy Exemptions and Chapter 13
Conversely, Chapter 13 bankruptcy is available to regular income earners who have a substantial debt burden. This involves proposing a structured repayment plan (between three and five years) to repay your debts with your future income. Generally, you keep all your assets in Chapter 13. However, you will need to repay most of your outstanding debts through the repayment plan. Your remaining qualified debts will be discharged at the end of your Chapter 13 repayment plan.
Don't Commingle Funds
Commingling funds in bankruptcy might expose some of your personal assets and exempt income (like Social Security benefits) to risks. How you hold these funds is crucial. Generally, it is advisable that you keep your Social Security income in a totally separate bank account until you complete your bankruptcy case.
If you keep it in a bank account containing nonexempt money, you may lose your protected Social Security benefits. Regardless, you're still required to report the benefits as income when filing your bankruptcy petition. Hence, you should speak with your bankruptcy attorney for proper guidance regarding how to handle certain assets and income.
Providing Help When You Need It Most
Filing for bankruptcy in Georgia can make you lose some of your nonexempt assets and income. Thankfully, Social Security benefits are protected in bankruptcy. However, how and where you keep that income matters. At Pytte Law, I have the experience and resources to advise and guide consumers through the complex procedures involved in bankruptcy.
As your legal counsel, I can determine the right bankruptcy chapter for your unique financial situation and help identify your nonexempt property and income. In addition, I will help file your petition, store away your Social Security benefits safely, and walk you through the legal procedures involved in bankruptcy from start to finish.
Contact me at Pytte Law today to schedule a simple case assessment with a reliable bankruptcy lawyer. I can offer you the highly-personalized legal counsel and reliable representation you need in your case. My firm proudly serves clients throughout Savannah, Hinesville, Statesboro, Richmond Hill, Effingham County, McIntosh County, and Long County.