Bankruptcy and Your Social Security Income – Can I Still File?
When people aren’t working, either because they are retired or because they are disabled, finances becomes an all-too-common struggle. The majority of the time, Social Security doesn’t cover what people really need to live on, and when you aren’t able to work – the cost of living quickly outpaces the money. When debt overwhelms people in this situation, the idea of bankruptcy can be frightening. The major worry is – what will happen to my Social Security benefits if I have to declare bankruptcy?
The answer here is – nothing. By Federal Law, your Social Security benefits are exempt, and protected from garnishment or attachment by creditors. Generally speaking, you will not lose your Social Security benefits, and they won’t be affected if you decide to declare bankruptcy.
However, before you decide to take the somewhat drastic step of filing bankruptcy, you should know that you may be “collection proof” anyway. What this means is that – if you stop paying your credit card bills because you don’t have the money – there’s nothing a credit card company can do to force you to pay. If you’ve gotten in over your head financially, and you’re struggling to stay afloat, no collection agency can come after you and take your Social Security income to repay those debts.
If you’re on Social Security, or Social Security Disability, that income is pretty much untouchable, although there are a few caveats which need to be considered. Creditors can call, they can threaten, and they can actually sue you and get a judgment – but they cannot make you pay anything and they cannot take any Social Security income from you. That said, the unfortunate thing is that you will have to endure the process of them attempting to get you to pay – sometimes for months – or longer.
And yes, they will send bills, threaten collection, call you, and make your life a misery, and yes – they will do this for months or longer. So, if you are someone who’s anxiety level skyrockets around this kind of pressure, this is another thing to take into consideration around filing bankruptcy. There are many people who actually do elect to go through bankruptcy just to eliminate the unpleasantness of this process, because declaring bankruptcy prevents creditors from contacting you at all. However – just remember that you don’t have to incur the expense of a bankruptcy just to protect yourself, because there is nothing any creditor can do, and no income that they can take.
You should, however, check with a lawyer to make sure you really are “judgment proof.” There are certain types of income and assets that creditors will still try and attach, so get your ducks in a row before you stop paying your credit cards. However, the bottom line is this – if you only have Social Security income and no assets, filing a bankruptcy may actually not be worth the cost, as you are already living below the poverty level. Plus – you also have rights, so you should stop worrying. They stopped throwing people into “debtors prison” over 200 years ago.