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If I'm receiving supplemental security income (SSI) can I file for bankruptcy?

Recently on our legal forum a user asked, “I have been receiving Supplemental Security Income (SSI) for two years. I have massive amounts of credit card debt and medical bills I will never be able to pay. I am wondering if I can file for bankruptcy and how my Supplemental Security Income (SSI) benefit will be affected?”

Supplemental Security Insurance (SSI) overview

Supplemental Security Income (SSI) provides monthly cash assistance to the blind, elderly, and disabled who have limited income and resources and who are unable to work for at least 12 continuous months.

If you are receiving the maximum SSI monthly benefits each month this means you are receiving $735 each month (some recipients may also receive an additional state supplemental benefit). With this in mind, assuming you have no other source of income, you will be under the income limit to file Chapter 7 bankruptcy. This means you should have no difficulty qualifying to file Chapter 7 bankruptcy.

Note: debtors who are receiving other disability benefits such as SSDI benefits may not qualify to file Chapter 7 bankruptcy, especially if they have multiple sources of income. They might be forced, instead, to file Chapter 13 bankruptcy and repay a portion of their debts over a 3 to 5 year period.

Filing Chapter 7 bankruptcy while receiving SSI benefit

If you decide to file Chapter 7 bankruptcy the court will assign a trustee to review your assets and determine if you have anything that can be liquidated. Given that you had to prove that you had very limited income and resources to qualify for SSI benefits, there’s a strong chance that you will not have any assets to liquidate.

There’s also more good news. Under bankruptcy and disability laws creditors will not be allowed to garnish or take any of your SSI benefits. Your SSI benefits are completely protected. So not only will your medical debts and credit card debts be discharged, you can also keep your SSI monthly income.

Filing bankruptcy can also stop garnishment for SSI overpayment

You did not specifically mention this as an issue, but it’s also important to note that if the SSA was attempting to collect an SSI overpayment from you and you filed for Chapter 7 bankruptcy, the SSA would cease all collection activity. The SSA office is also generally precluded from attempting to collect any SSI debt that existed prior to the bankruptcy filing.

Note: Although Chapter 7 bankruptcy may discharge certain unsecured debts such as medical bills, unsecured personal loans, and credit card debts, certain unsecured debts will remain after filing for bankruptcy protection. For example, debts such as spousal support and child support are not discharged.

It’s worth noting, however, that noncustodial parents who are only receiving SSI benefits are generally not required to pay child support. Although this might seem unfair, the thinking is that an SSI payment is considered a welfare benefit and cannot be garnished for child support.

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