Before we get into the matter of Social Security benefits, we should provide some context about Chapter 7 bankruptcy and the intricacies that go along with it. This is a liquidation form of bankruptcy, and depending on the circumstances, it can eliminate some or all of the debts that are making like difficult for you.
To qualify for this form of bankruptcy, you must be able to pass the means test that is in place to determine whether you have enough disposable income to make an effort to pay back your debts over time. A formula is used to make this determination if your income is more than the median income in your state. Getting back to Social Security benefits, your monthly direct deposit would not be counted when this means test is being conducted.
As we mentioned previously, this is a liquidation bankruptcy, and this means that property that is not exempt or secured would be turned over to a bankruptcy trustee. Under state laws, the trustee would liquidate the property and use the proceeds to pay back creditors. The good news is that many different types of property are exempt, including your Social Security benefits. For your information, here are some of the other types of property that are exempt when you are filing for a Chapter 7 bankruptcy:
- $47,000 of Home Equity for joint filers
- $3775 of Motor Vehicle Equity
- Retirement Accounts and Pensions
- Veterans Benefits
- Some Personal Property
You are going to be required to submit a great deal of paperwork when you file for Chapter 7, including a detailed accounting of your assets. While it is true that your Social Security benefits are exempt, you have to be sure that it is clear that benefits that may have accumulated in a bank account are in fact coming from Social Security. If you co-mingle your funds in one account, it can be hard to prove that a portion of the account should be exempt because it came from your Social Security benefits.
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If you have questions about bankruptcy, we can provide answers, and we can guide you toward the optimal course of action given your unique set of circumstances. We offer free bankruptcy consultations to people in Tigard, Salem, Klamath Falls, Roseburg, and numerous other communities throughout the state of Oregon. If you would like to set up an appointment, simply send us a brief message through our contact page and we will get back in touch with you soon as we can.