Many older Americans who are contemplating bankruptcy worry it may impact their Social Security benefits.

This is a reasonable concern, as many retirees rely on that income to survive. 

Here’s what you need to know.

You Must Report Social Security

You must report your Social Security income on your bankruptcy schedule like any other income source or asset, if applicable. 

Eligibility or Benefit Amounts

Filing for bankruptcy won’t impact your benefits eligibility, nor will it reduce your payments in any way. It won’t touch the frequency of your payments, either. 

In short, if you’re not already using your benefits, bankruptcy won’t impact Social Security at all. 

Social Security as Income

Your Social Security income may not be considered as part of your income and assets when means testing you for Chapter 7. The courts also do not consider them as income for the purposes of determining your Chapter 13 repayment plan length.

Social security income is used to determine how much you’ll pay into a Chapter 13 repayment plan each month if you file for Chapter 13 bankruptcy. If the trustee believes you retain enough income to make payments to creditors, they may also ask a Chapter 7 be converted to Chapter 13, even if you meet the means test. 

Your bankruptcy attorney can tell you whether it is likely the trustee will make such a move in your case so that you may plan ahead.  

The court may not garnish your benefits in any way to repay your debts. 

You must be careful to protect your benefits properly, however. If you’re comingling your Social Security benefits with work income funds, for example, the trustee may be able to use those funds. Set up a separate account to protect those benefits. 

This is especially true if you received lump sum SSDI and SSI payments for disabilities. Those funds should always be placed in a second account to ensure they are not being treated as part of the bankruptcy estate.

If some comingling of funds has already taken place, speak to your bankruptcy attorney about ways to protect as much money as possible. 

Get Help Today

Social security is complex, and so is bankruptcy. Before making any big financial moves like filing for bankruptcy, you should consult with a qualified New York Bankruptcy attorney.

Call Haysom Law to schedule your free consultation today.

See also: 

What Will Your Chapter 13 Payment Be? 

How Much Protection Does Chapter 13 Offer for a Retirement Plan? 

What Will Happen to Your Life Insurance Policy in Your New York Bankruptcy?