Do I really need to file for bankruptcy if I’m only receiving Social Security?

January 20, 2020
Do I really need to file for bankruptcy if I’m only receiving Social Security?

There are many people we meet with initially who are only receiving Social Security benefits for their income. Most wonder if they even need to file for bankruptcy if they are only receiving social security. And to be blunt, some of them really don’t need to file bankruptcy.

Social Security benefits are safe from your general creditors such as credit cards, medical bills, etc..  However, Social Security benefits can be garnished in some instances for federal taxes, federal student loans, child support, alimony, victim reparations and various federal debts.

It depends also on the type of Social Security benefits you are receiving.

Types of Social Security Benefits

For example, Supplemental Security Income (SSI), which is a federal income supplement program funded by general tax revenues (i.e., not Social Security taxes) and is designed to help aged, blind and disabled people who have little or no other income or assets with which to meet basic needs for food, clothing and shelter, is protected from garnishment even if the creditor could garnish regular Social Security benefits.

However, Social Security Disability Income (SSDI), a federal income program that offers monthly Social Security Disability payments to people under age 65 who have qualifying disabilities and sufficient work credits, can be garnished to pay child support and alimony, court-ordered restitution to a crime victim, back taxes, and non-tax debt owed to a federal agency, such as student loans or some federally funded home loans.

Reasons to Consider Filing for Bankruptcy

There are various reasons why you might still want to consider filing for bankruptcy even if you don’t owe taxes, student loans, victim restitution, child support or alimony, or debts to federal agencies.

Let’s say you only receive regular Social Security and only have credit card debt and medical debt.  What can a creditor do to you?  In many cases, not much, especially if you don’t have any assets.

But what if you do have assets, like a house or a vehicle or family heirloom furniture, etc?  Can a general creditor take those?  That will depend on what exemptions you have available to you in your state.  Exemptions are what allow you to keep certain assets up to certain dollar amounts.  So, if your assets can be exempted then your general creditors will not be able to collect against those.

Another thing to consider is that maybe you want to try to leave your house to your children or a charity or somebody else.  If you live in Missouri and a creditor gets a judgment against you it automatically become a judgment lien against your real estate if the judgment was entered in the county in which you have your home, which most of the time it will be entered in that county.

That creates an issue later because if your heirs or devisees want to sell the real estate, they’ll have to satisfy that lien before a marketable title can be given to the buyer.  If that debt had been discharged in bankruptcy before the creditor got a judgment against you then there’d be no issue later with your real estate regarding that debt.

Or what if you don’t have any assets right now, but end up being an heir or devisee of somebody who does have a lot of assets or perhaps you win the lottery? If you had filed a bankruptcy before and received a discharge of your debt those assets would not be at risk.

There are also many people who just don’t want to deal with the stress and anxiety of having to deal with their creditors. In your golden years, do you really want to be harassed all the time with your creditors calling you every day, sending threatening letters or getting judgments against you? Many people decide they’d rather just have some peace of mind during those years. It becomes a quality of life issue for many.

If you are receiving Social Security benefits and don’t know if bankruptcy would be a good option for you, please contact one of our attorneys to find out what your options are.