Will Bankruptcy Affect Any of Your Social Security Benefits?
If you think you’re going to need the services of a bankruptcy attorney in Brooklyn and you receive social security benefits, you may be worried about losing that income. While that’s a common concern, it’s no reason to avoid seeking the financial relief that filing for bankruptcy can provide. This overview will help you understand how to protect your social security income during and after filing for bankruptcy.
What are the Differences Between a Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7
When a bankruptcy attorney Brooklyn NY helps you file chapter 7, you can usually keep most of your assets. Some items might have to be relinquished to a trustee who will liquidate the assets to repay some of your debts. Overall, there are some types of property that are considered exempt, which means they can’t be used to repay the debts you owe.
You do have to qualify for this type of bankruptcy via a process called a means test. The means test compares your income and assets against your debts to determine if you have the ability to repay what you owe within a reasonable amount of time. If that’s the case, you will have failed the means test and must repay your debts. If you don’t have the means to meet your financial obligations, you will have passed the means test and can file for a chapter 7 bankruptcy.
Chapter 13
If you can’t pass the means test in a Brooklyn Bankruptcy, you still have the option of filing for a chapter 13 bankruptcy. Rather than discharging all or most of your debt, a chapter 13 involves creating a debt repayment plan. Some types of debt may still be discharged, but the majority of your debt will be included in the repayment plan. You and your Brooklyn bankruptcy attorney will have to come up with a plan that allows you to fully repay your remaining debts within five years. You’ll also have to be able to prove to a judge that you are capable of making your monthly payments.
Will Your Bankruptcy Affect Your Social Security Benefits?
Even though your social security benefits are counted as income when you file your annual taxes, they are not considered income for the purpose of filing for bankruptcy. There are federal laws in place that protect your social security benefits from being seized as a part of a bankruptcy. This is an automatic exemption without your Brooklyn bankruptcy attorneys having to do anything to protect those funds. Your lawyer can help you declare other assets as exempt as well, but there aren’t any circumstances in which the money you receive from Social Security isn’t protected.
How Can You Protect Your Social Security Income?
There may be a problem if you also earn income from another source and those funds aren’t kept separate. In that situation, it may be difficult to determine which funds were received as a part of your Social Security benefits. These tips can help you avoid that situation.
Maintain a Separate Account
You should have a separate checking account for your social security benefits. The direct deposits you receive from the Department of Social Security should be the only money deposited into that account.
Spend Commingled Funds First
If you have everything in one account, you should arrange for your Social Security benefits to be deposited into your new account. In the meantime, be sure to spend your commingled funds before touching any new income you receive. This will help you ensure your Social Security benefits will be divided from other income sources.
If you have already reached a point at which you know you’ll be filing for relief, you should consult a bankruptcy attorney Brooklyn before making any unusual money moves. The experienced legal team at Ursulova Law Offices can guide you in doing what’s best for your situation. This includes advising you in handling your Social Security income before filing for bankruptcy as well as helping you file for debt relief. They can also help you choose the bankruptcy option that’s best for your situation.
