When you are in financial trouble, bankruptcy is often a viable option to get yourself out of a hole. While you may lose a lot through a poor credit score, such as the ability to get credit cards or loans, you also clear up a chunk of your existing debt. However, people often wonder whether their social security money is in jeopardy if they file for chapter 7 or chapter 13 bankruptcy. Here is a look at the issue.
Social security helps people when they reach retirement age, with most individuals making contributions to social security during their working life. There is also supplemental income for people who suffer from disabilities.
Chapter 7 bankruptcy occurs when you are no longer able to repay your debts. The courts will assist you in liquidating all your assets and paying off as much debt as you can. If you own a home, it is sold off. If you have a nice car, it is also sold to pay off creditors. A trustee is appointed to oversee your finances and handle the entire process, along with setting an income level that you receive monthly through the process. You emerge debt-free (aside from student loans).
Social Security and Bankruptcy:
If you are applying for bankruptcy, they are probably going to ask you to take a means test. This determines whether you have enough money in your accounts and holdings in order to pay your unsecured creditors. Remember, secured credit is paid by selling off the assets you secured to get those loans.
The means test requires you to list your income and any assets that are not secured. However, social security income does not get included in this test.That money should be present and under your name when the bankruptcy process is over.
Anyone filing for chapter 13 bankruptcy is encouraged to speak with an attorney about the entire process. It is slightly different and more complicated to chapter 7. While most states do not include social security in chapter 13, it is best to know the laws specific to your circumstances.
SM Law Group Can Help
The bankruptcy attorneys of SM Law Group can make the entire process a lot easier, because they know the law inside and out. Instead of spending hours trying to figure out these complications yourself consult with one of our trusted attorneys today.