If you are retired and struggling with your finances, something that you may be looking into is filing for bankruptcy. If you elect to go into bankruptcy, you may be able to have most, if not all, of your debt eliminated. While not all debts are dischargeable, most are. Repossession deficiencies, medical debts, credit cards, payday loans and most other debts can be wiped out.
Since you’re living on Social Security benefits, you may not be sure how a bankruptcy will affect your income. You’re already living on limited means, so it’s reasonable to worry about what could happen. Bankruptcy normally does not affect your Social Security at all.
Are your Social Security benefits exempt from bankruptcy?
In most cases, Social Security benefits are exempt from garnishment, levy, attachment or bankruptcy. There are exceptions, however, such as if you owe past-due federal taxes or child support payments. In some instances, Social Security may be garnished for the purposes of child support or alimony as well.
What is an exemption, and how could it help protect your assets?
An exemption is used to protect certain belongings from liquidation by the bankruptcy trustee. Normally your exemptions are sufficient to protect all of your property.
There are many different exemptions available, so that is something that you should discuss with your attorney. The right exemptions do make a significant difference in how much you have to liquidate if you choose to go through a Chapter 7 bankruptcy. If any property is in jeopardy, your attorney can explain how it could be protected in a Chapter 13.
Your attorney can talk to you about the two main kinds of bankruptcy, Chapter 7 and 13, so you can decide if one of these is right for you. Your Social Security benefits should be well protected in most cases, but they can also let you know if they will be impacted.