I need to file for bankruptcy protection. What will happen to my Social Security disability payments?

Petition for BankruptcyThe Social Security disability payments that you receive each month help you financially. Your Social Security disability deposits provide some money to pay for essential things such as food, shelter, heat, and food.

The exact amount of monthly Social Security disability payments depends on your work history and changes slightly from year to year. However, in January 2020, the average monthly Social Security disability payment to a disabled worker was $1,258. Given the high cost of living in the Greater Boston area and throughout Massachusetts, Rhode Island, and New Hampshire, Social Security disability benefits are unlikely to pay all of your bills.

You may be in debt. Your next step may be to file for bankruptcy relief so that you can have the fresh start bankruptcy allows. However, you may be worried about what will happen to your Social Security disability benefits if you pursue a bankruptcy case.

Keep Your Social Security Disability Income and File for Bankruptcy

You don’t have to choose between bankruptcy and Social Security disability. In most cases, you can keep your Social Security disability payments and get bankruptcy relief.

Chapter 7 Bankruptcies

Chapter 7 bankruptcies are also known as liquidation bankruptcies. In a Chapter 7 bankruptcy case, your assets that are classified as non-exempt assets are sold and distributed to your creditors to satisfy your debts. Therefore, the question becomes whether Social Security disability payments are exempt assets.

Social Security disability payments may be exempt pursuant to state exemption laws or the federal exemption law. You must decide whether you are going to choose the state exemptions or the federal exemptions when you file for Chapter 7 bankruptcy. Therefore, it is important to let your bankruptcy lawyer know that you receive Social Security disability payments so that all relevant factors can be considered when deciding which exemption list to choose.

Even if your Social Security disability payments are exempt from a Chapter 7 bankruptcy, there is an important factor that can complicate your case. Most people have their Social Security disability payments deposited into a bank account that also has money from other sources. Whether it is money that was gifted to you or that you earned from a hobby, for example, the money is not all from the Social Security Administration.

The comingling of money in one bank account makes it hard for the Chapter 7 Trustee to determine which money is Social Security disability income and which money is from other sources. The Trustee may decide that it is impossible to figure out how much of the money is from Social Security disability and, therefore, the entire bank account may be non-exempt and used to pay your creditors. This problem may be avoided if you keep Social Security disability payments in a separate bank account.

Chapter 13 Bankruptcies

Chapter 13 bankruptcy works differently than Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you keep all of your assets and pay your creditors through a court-approved monthly repayment plan over a three- to five-year period. Your income and expenses are considered when a repayment plan is created. Your Social Security disability income may be exempt from the income that is considered when determining your ability to repay your creditors.

Talk to a Social Security Disability Lawyer to Protect All of Your Rights

Your bankruptcy lawyer will make sure that Social Security disability payments and other exempt assets are protected during bankruptcy. However, you may have other concerns about your Social Security disability payments, such as:

Our Boston area Social Security disability lawyers encourage you to contact us as soon as you have a question. Don’t wait for the Social Security Administration to take away your benefits. Instead, let’s work together to make sure that there is no interruption in the benefits you receive.

To learn more, please contact us through this website or by phone at any time. We would be pleased to offer you a free consultation by phone or in person to discuss your legal options.

Are You Looking for a Social Security Disability Attorney in Natick, MA?

If you are looking to apply for social security disability, you need to speak with an experienced social security disability lawyer as soon as possible. Please contact us online or call our Natick Office directly at 508.283.5500 to schedule your free consultation.


John L. Keefe
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Founding Attorney, Massachusetts Social Security Disability Lawyer