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Can I keep receiving Social Security after bankruptcy?
If you’re thinking of filing for bankruptcy, and you’re worried about getting your social security after going bankrupt, there’s little to worry about. The general rule is that Social Security payments are exempt from bankruptcy proceedings unless you’ve commingled those with other funds. If you have commingled them, future payments shouldn’t be affected, so long as you open a separate account and arrange to have those payments deposited there. Federal law specifically exempts Social Security payments from bankruptcy, and the bankruptcy courts recognize and protect that exemption.
Prior Social Security
Any Social Security benefits that a person might have received before having filed for bankruptcy are also protected, but the same warning applies about commingling. You’ll want to be able to show the bankruptcy trustee which funds are from Social Security and which funds, if any, aren’t derived from that source. If you can’t make that distinction, there’s a chance that you could lose all of the commingled money.
Some people have their Social Security benefits deposited into a segregated, dedicated account. When you’ve done that, you can account for every penny of income derived from Social Security that’s protected from creditors.
Lump sum payments
Sometimes people receive lump sum payments from Social Security that operate as a retroactive payment that might be thousands and thousands of dollars. That money is protected by the same laws that protect monthly Social Security payments, but it’s also subject to the same commingling rules.
There’s a right way and a wrong way about having Social Security payments deposited. It’s really quite simple. The left hand’s income goes into the left hand’s accounts, and the right hand’s Social Security payments go into another separate account that isn’t commingled with anything. Many people who are receiving Social Security who are petitioning for bankruptcy have issues dealing with left hand and right hand deposits. Don’t let the problem mushroom when you can easily be in control of it.
Contact a Los Angeles Bankruptcy Lawyer today
Contact us by phone or email if you’re thinking about bankruptcy. We don’t want to see a penny of your Social Security affected either.
We assist people with bankruptcy in the following areas and counties of California:
- Los Angeles County
- San Fernando Valley
- Orange County
- San Bernardino County
- Riverside County
- Ventura County
- Santa Barbara County