If you rely on Social Security and are considering filing for Chapter 13 or Chapter 7 bankruptcy, you may be worried about losing your retirement benefits. Fortunately, most borrowers can receive the debt relief they need without risking their Social Security, but the specific rules depend on the type of bankruptcy protection you’re seeking. Below is an overview of how filing for bankruptcy protection affects your Social Security.

Filing for Chapter 7 Bankruptcy 

A Chapter 7 bankruptcy allows you to eliminate most unsecured debts. In exchange, the trustee of the court may have the right to seize some of your assets. Fortunately, Social Security benefits are exempt from seizure, so you won’t lose your benefits after the case is discharged.

To file for Chapter 7 bankruptcy protection, you’ll also have to pass a means test to prove you’re unable to meet your financial obligations. Social Security income isn’t counted on these tests, so your benefits won’t prevent you from getting debt relief.

Choosing Chapter 13

Chapter 13 bankruptcy is intended for those with secured debts like mortgages and auto loans. Through a court-managed payment plan, these programs allow you to pay back arrears on your debts, potentially avoiding repossession and foreclosure. Because no assets are seized, your Social Security won’t be at risk if you file for Chapter 13.

However, you will have to show that you have the financial resources to make your regular bankruptcy payments while keeping your other accounts current. When establishing your monthly budget, you’ll likely have to report your Social Security income. Fortunately, this may increase your chances of having your payment plan accepted. 

For over 40 years, the legal team at Hurtt & Johnson, LLC has provided personal attention and customized solutions to struggling borrowers throughout Dalton and Northwest Georgia. If you’re considering filing for bankruptcy, they’ll give you the one-on-one service and detailed guidance these important matters deserve. Visit their website for more information on their debt relief services, get more legal tips on Facebook, or call (706) 226-5425 to schedule an initial consultation.