Social Security and Bankruptcy

Mar 27, 2019

Social Security and Bankruptcy

Bankruptcy can be a good option when you are unable to keep up with your monthly payments and the amount of debt you have continues to grow.. Many individuals receiving social security benefits are struggling to keep up with their growing debt but are not aware of how social security benefits and bankruptcy work together. Some individuals have a pending social security disability case and don’t know how filing bankruptcy will affect their case. Let’s explore how social security benefits and bankruptcy work.


There are four main types of social security benefits, which are based on the person receiving them. The types are retirement, disability, survivors and supplemental benefits. Please note, if your only income is social security benefits the average creditor CANNOT garnish your benefits. Check out our blog “Can My Wages Be Garnished”. However, federal tax debt, federal student loans, child support and alimony may still be able to garnish your social security. The only exception is for Supplemental Security Income (SSI). SSI is protected from garnishment. When it comes to how social security benefits and bankruptcy, all types of social security benefits are treated the same.


When filing bankruptcy, the bankruptcy court will want you to account for your income. There is a limit to the amount of money you can make and still file a Chapter 7 Bankruptcy. Check out our blog, “Do I Make Too Much to File for Chapter 7 Bankruptcy?” You will need to account for income you have received over the last six months on the Means Test and your future income on Schedule I. Social security benefits do not need to be include as income on the Means Test. Also, your social security benefits do not have to be included as income when your budget is calculated in your bankruptcy. However, if you need to use some of your social security benefits to show the bankruptcy court that you can afford certain items, like a car loan, you can.

Please note that VA Benefits and private disability are not treated the same as social security benefits. Both need to be included as income on the Means Test and in your budget on the bankruptcy forms.


For social security disability claims, you may be eligible to receive disability benefits as far back as the date of your application for social security disability. The amount of money you receive in back pay benefits can be a large sum due to the length of the process and the fact that many have to appeal the original decision. Those back pay benefits can be protected for you in the bankruptcy as long as they are not commingled with any other non-social security funds. If you have a pending social security disability claim and are thinking of filing bankruptcy, make sure to discuss this with an experienced bankruptcy attorney.


Social Security benefits and bankruptcy can be complicated and it is crucial to meet and discuss your situation with an experienced bankruptcy attorney. Pedersen Law Office, LLC offers free consults in all of our areas of practice and will meet with you personally to discuss your specific circumstances and see what options are available for you. Our law office serves the communities of Appleton, Neenah, Menasha, Oshkosh, Green Bay and their surrounding areas.

Category: Bankruptcy

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