Law – Getting Started & Next Steps

by Geraldine

Social Security in the Bankruptcy Chapter

The benefits of social security that are received by a debtor are found in the subject of bankruptcy. However, one experience a lot of trouble if they have social security benefits prior to filing for bankruptcy. It is the responsibility of social security administration and bankruptcy courts to protect the social security benefits. It is important to note that you have the right to enjoy social security benefits and should not be taken from you. Protection is provided to social security benefits applied before you file for bankruptcy.

But if you mix social security benefits with non-social security funds, you are likely not to be exempted any fund. By commingle your Social Security Benefits with other funds, you are likely to lose the entire amount that should be exempted for social security benefit. Each case of social security benefits will depend on the trustee assigned to oversee the matter. It very important that you have your social security benefits in an account that you don’t use to deposit other funds.
When social security benefits are separately kept from other funds, it the debtor will easily show the trustee that every dollar comes from the Social Security Administration. When you deposit other funds to social benefit account, the trustee will conclude that the account is not protected. Wildcard or cash-on-hand exemption are some of the ways to keep your social security benefits protected. The Retroactive can also be protected by the federal law.

However the same rules applies when it comes to commingling funds. By commingling lump-sum social security with other funds the account is no longer unprotected. The likelihood of the trustee to argue that the lump sum is in the bankruptcy estate will be determined by how big the potential payoff is. A trustee benefits more from trying to represent the interest of a creditor who has social security payment commingled with other funds. You need to ensure that your Social security are separate from the other account in order to be able to show the court that your account are protected.

In the event that you become bankrupt, your property, personal items is vested in the bankruptcy trustee. It is possible for a creditor to claim proof with the trustee. As long as this is accepted by the trustee, payments can be made to the creditor via dividends. A person who is discharged from bankruptcy is released from all debts even if they are not proven. The only exception is when the debt was obtained through fraud. All debts in bankruptcy including social treatment are treated in the same way. The entire recovery action is stopped immediately a person who is who has a social security debt is declared bankrupt. Once a debtor is declared bankrupt, it is not possible to do repayment through deduction from the social payment. Any time a debtor is declared bankrupt, money paid towards him should be returned unless the trusty need to do the repayment.

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