Are Social Security Benefits Protected From Bankruptcy?

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Are Social Security Benefits Protected in Bankruptcy?  The short answer is yes and no. 

Provisions Against Garnishment

In general, creditors cannot attach social security benefits for the payment of debts regardless of bankruptcy protections.  Federal law prohibits assignment, levy, or garnishment of your social security benefits. Social Security’s responsibility for protecting your benefits against garnishment stops once your benefit reaches your bank account, unless you can prove that the only funds that go into that account are social security benefits.

 However, there are exceptions, benefits can be garnished for payment of:

  • Child support and/or alimony obligations
  • Unpaid federal taxes
  • Non-tax debt owed to another federal agency
  • Up to 15% of the monthly benefit can be garnished in these cases

Bankruptcy Protections

If you have suffered an attachment or levy against your bank account by creditor before filing bankruptcy, the protections of the Automatic Stay would end the levy or attachment.  This would protect your income from Social Security even if you had comingled funds in the account with funds from another source. Bankruptcy law could lessen the amount of tax debt you would have to pay if part of the tax obligation was not a priority debt under bankruptcy regulations.

Social Security Disability Benefits are not counted as part of your mean income in bankruptcy as Congress specifically excluded them.  This would make it easier to qualify for a chapter 7 filing, but disability benefits would be counted as income in relation to a chapter 13 plan.  If you are due, any lump sum payments from Social Security the lump sum payment may be treated differently than your regular monthly benefit.

A negative aspect of bankruptcy protections in relating to your social security income would be that if you were a Chapter 13 debtor, you would be unable to make automatic payments to a chapter 13 plan because of the prohibition against attaching social security benefits.  Chapter 13 plans have a better chance of success when payments are made automatically to the trustee through a wage order.

Talk to a Bankruptcy Lawyer

Bankruptcy Rules and Regulations are complicated.  Social Security law is also complicated.  Your wisest course would be to seek legal advice to protect your social security income if you are contemplating filing for bankruptcy protection.  Try to find counsel experienced in both bankruptcy and Social Security law if possible.

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