Recently on our legal forum a user asked, “I have been on Supplemental Security Income disability for five years for a severe brain tumor and cancer. I have accumulated $25,000 in unsecured credit card debts, a car loan of $10,000, and medical bills exceeding $20,000. I am wondering if I can file bankruptcy on SSI, and if so, will my SSI benefits be protected?”
What is Supplemental Security Income?
Supplemental Security Income (SSI) is provided to the aged, disabled, and blind who are unable to work for at least 12 continuous months. Unlike other disability recipients who earn disability benefits (i.e. SSDI) from the federal government, SSI recipients will only qualify for benefits if they meet specific income and resource limits.
What will bankruptcy do for me?
Filing for bankruptcy protection allows many debtors who are in a financial crisis to discharge or restructure their debts and make a fresh financial start. Given that you receive Supplemental Security Income it’s likely that your financial status may be even more dire than the average debtor. Not only do you have few resources to sell, you also have limited options to increase your income and pay down your debts.
Chapter 7 bankruptcy while receiving SSI benefits?
Filing for bankruptcy is an important decision; one which should not be made until you have considered your financial options. If you have done this and decided it is the best course of action, however, the first type of bankruptcy you might want to consider is Chapter 7 bankruptcy.
Although filing Chapter 7 bankruptcy has become more difficult for high wage earners, assuming your only source of income is your SSI benefit, you should have no difficulty qualifying. If you do decide to file, the court will appoint a trustee to review your debts, collect your nonexempt assets, and liquidate them to repay your creditors in priority order determined by the bankruptcy court.
Note: exempted assets vary by state and federal law, but generally include your home, a vehicle, household furnishings, and appliances. Many of these exemptions set a maximum dollar amount that can be excluded.
Chapter 13 bankruptcy while receiving Supplemental Security Income?
Chapter 13 bankruptcy does not immediately discharge your unsecured debts, but it does allow you to repay your debts over a 3 or 5 year repayment period. To qualify for Chapter 13 bankruptcy, however, the court will expect that you have sufficient income to make the plan payments.
If you are not able to make the payments, it may be possible to convert your case to a Chapter 7 bankruptcy case. Other debtors who fail to complete their Chapter 13 bankruptcy plan may simply have their case dismissed.
Filing bankruptcy is not the right choice for everyone, but if you are receiving SSI benefits and you think it’s best for you, it might allow you to discharge or repay certain debts.
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