What Happens To Social Security Disability Benefits If You File For A Chapter 7 Bankruptcy?

Generally, you will be able to keep your Social Security disability payments in a Chapter 7 bankruptcy case. However, Social Security disability benefit payments may be relevant to two aspects of your Chapter 7 bankruptcy case and it is important to get answers to these questions so that you can understand your rights and keep the benefits to which are legally entitled.

Do Social Security Disability Payments Impact Your Eligibility for Chapter 7 Bankruptcy?

You may only file a Chapter 7 bankruptcy case if you pass a means test to prove that you do not have sufficient income to pay your creditors. Generally, Social Security disability benefits are not considered to be income for purposes of the Chapter 7 means test and, therefore, should not impact your eligibility for Chapter 7 bankruptcy relief.

Will Your Social Security Disability Payments Be Used to Pay Your Creditors?

In a Chapter 7 bankruptcy case, all of your non-exempt assets are part of your bankruptcy estate. The bankruptcy trustee will take all of your non-exempt assets and distribute them among your creditors to satisfy your debts. Federal law exempts Social Security disability benefits from your bankruptcy estate in most cases. Therefore, your Social Security disability benefits are likely to be safe from your creditors during a Chapter 7 bankruptcy case.

Protect Your Rights by Making Sure Everyone Knows What’s Going On

It is important to inform your bankruptcy attorney about your Social Security disability benefits and your Social Security disability lawyer about your bankruptcy. If your legal team has full knowledge about your other legal proceedings, they can make sure that all of your rights are protected.

If you would like to learn more about your rights to Social Security disability benefits, we encourage you to read our free book, Social Security Disability: What You Need to Know, and to contact us via this website or by phone to schedule your initial consultation with a board certified Social Security disability attorney.