Not having enough resources to pay medical bills, credit card debt, mortgages, auto loans and other expenses can be extremely stressful. Unfortunately, financial anxiety can ruin your otherwise happy retirement. Either Chapter 7 or Chapter 13 bankruptcy protection may give you the financial peace of mind you seek.
You may have considerable Social Security benefits that should last you until the end of your life. If you are struggling to pay your bills, though, you may wonder how a bankruptcy filing may affect your Social Security payments.
Your bankruptcy filing
Whether you plan to file for Chapter 7 or Chapter 13 bankruptcy, you must list all your assets. These may include your home, savings, investments, personal property and other sources of wealth. With a Chapter 7 filing, you may need to liquidate many of these assets to satisfy outstanding debts and discharge others. If you choose to file for Chapter 13 protection, on the other hand, you have an opportunity to restructure your debt and develop a repayment plan.
The Social Security exemption
Whether you can keep certain assets during bankruptcy depends on a few different factors. You should realize, though, that federal law specifically exempts Social Security payments from the bankruptcy process. As such, you likely do not have to worry about losing your Social Security benefits after filing for either Chapter 7 or Chapter 13 protection.
To be certain that your Social Security benefits do not reach the hands of your creditors, you must be careful not to commingle funds. That is, if you put your Social Security payments into the same account as other money, a bankruptcy judge may not be able to tell the difference. Accordingly, you should strongly consider keeping your Social Security payments separate from other money.
Bankruptcy protection may be the right approach for managing your outstanding debt. Fortunately, because Social Security payments are usually exempt from the bankruptcy process, you do not have to stress about losing your hard-earned benefits during or after your filing.