Declaring bankruptcy helps many people regain their financial freedom after struggling with debt. However, debt repayment can become a concern for those who rely on Social Security income; can checks be garnished by a bankruptcy trustee to pay back creditors? If you are considering filing a Chapter 7 or Chapter 13 and you currently receive Social Security payments, it’s important that you consult an attorney to gain a better understanding of what you can expect. Here is some insight into how bankruptcy affects Social Security.

A Guide to Social Security Income & Bankruptcy 

How is Social Security income regarded in terms of the means test?

To determine if you’re eligible to file a Chapter 7 bankruptcy, you must take a means test that shows you do not have enough income each month to pay your creditors. This will require you to disclose all the income you receive from different sources, with the exception of your Social Security income. These payments aren’t used in the calculation to decide if you qualify for a Chapter 7 filing.  

What Happens to Social Security Income When Filing Bankruptcy?

By federal law, Social Security income is exempt from seizure or garnishment in a bankruptcy. Although, a major exception to this can be if you placed your Social Security checks in the same account as your other income or have received a lump sum payment from the Social Security Administration. In this case, the trustee may try to argue that it can’t be proven which funds are Social Security, and therefore, your payments are no longer exempt. 

How Can You Protect Your Social Security Income? 

If your Social Security income has been combined with other money, you may still be able to protect it by using another exemption allowed in bankruptcy, such as wild card or cash on hand. The best way to avoid losing your Social Security payments, however, is to arrange for your checks to be deposited into a separate bank account. This will prevent any doubt that the funds fall under the exemption rule. 

Bankruptcy laws can be challenging to grasp. As such, it’s in your best interest to work with a bankruptcy lawyer at Bueker Law Firm who will guide you through the filing process and clear up any confusion or concerns you may have about keeping your Social Security income. With more than 16 years of experience, they have helped numerous residents in Stuttgart, AR, achieve debt relief and start on the path towards a healthy financial future. Call (870) 673-1313 to schedule a consultation, or visit them online to learn more about your bankruptcy options.