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Will filing for bankruptcy affect your disability benefits?

On Behalf of | Aug 26, 2022 | bankruptcy |

You may be in dire straits when you have a financial crisis and need to declare bankruptcy to get back on your feet, yet you don’t want to lose disability benefits. They could be your only source of income, and in essence, your lifeline.

Your worries are well founded, given that these benefits may be considered assets when filing for bankruptcy. Here is what you need to know if you are an Illinois resident.

Illinois bankruptcy exemptions may apply

When you file for bankruptcy, certain assets are exempted from the process, and you can get to keep them. The exemptions are meant to ensure you can lead a normal life before your situation improves. They include your personal property and homestead (up to a specific value), among other exemptions.

Social Security Disability benefits are also exempt from bankruptcy in Illinois. It means that you should not have to worry about losing them – nor do you have to worry about how they will affect your eligibility requirements for Chapter 7.

Before filing for bankruptcy

Being aware of these and other exemptions before filing for bankruptcy is crucial. You may be surprised by how much of your assets you can protect from the bankruptcy trustee. Most importantly, it will help you plan and prepare for life ahead with an informed mindset.

Remember, bankruptcy exemptions are periodically revised, and you should stay current to make the most of the process. It is in your best interests to have someone who understands the ins and outs of the bankruptcy process on your side before taking the first step. Talk to a bankruptcy attorney to better understand the process.