If you are considering filing for bankruptcy and are receiving disability benefits, no doubt one of your biggest questions is whether or not your disability payments will be protected. Normally, you will be able to keep them. They will be protected from the bankruptcy trustee, but all are not treated the same.
There are basically three types of disability benefits:
- Social Security
- Veterans
- Private
The Three Categories
In a Chapter 7 dissolution bankruptcy, assets that are not exempt may be sold by the bankruptcy trustee for the sake of creditors. In a Chapter 13 reorganization bankruptcy, the trustee cannot sell assets, but any assets that are not exempt add to the amount you will have to pay unsecured creditors through your Chapter 13 repayment plan.
We will get into exemptions in a moment. But first, let’s look at the three types.
Social Security Benefits
Social Security Disability Insurance (SSDI) Benefits
When you declare bankruptcy, you are allowed to keep income you need to support yourself and your dependents. People who get continuing monthly Social Security Disability Insurance (SSDI) benefits generally need it for just that reason. That alone protects these benefits from being seized by a bankruptcy trustee. But there are also specific protections built into Social Security and state and federal bankruptcy laws.
However, if instead of getting monthly payments, you get a one-time payment, it’s a little more complicated. You will have to prove that money was an SSDI payment. You will want to contact an experienced Florida bankruptcy attorney to discuss how to track the payment and how to provide credible evidence to the bankruptcy court.
Supplemental Security Income (SSI) Benefits
Usually, only people with very little income can receive Supplemental Security Income (SSI) disability benefits. The purpose is to provide the disabled with the basics. For that reason, SSI benefits fall under Social Security and are exempt in bankruptcy under federal law.
Veterans’ Disability Benefits
Though Social Security disability payments are exempt under federal law, disability benefits paid by the Department of Defense or Veteran’s Affairs do not fall under social security.
However, these benefits are now exempt under the federal law known as the Honoring American Veterans in Extreme Need Act, (HAVEN). The Act exempts certain monthly benefits, because it modified the definition of “current monthly income” under the Bankruptcy Code to exclude veterans’ benefits.
Private Disability Benefits
Disability benefits not from Social Security (such as insurance benefits) are treated differently. How much you are allowed to keep depends on state law.
Fortunately for Florida residents, Section 222.18 of the Florida Statutes says that disability income benefits are exempt from attachment, garnishment or legal processes in Florida. That includes creditors’ claims in bankruptcy.
Is It Enough to Just Live in Florida to Get Protection from Florida Bankruptcy Exemptions?
Some states allow those who declare bankruptcy to choose between exemptions established under federal law and those established under state law. But in Florida, you must use the Florida exemptions if you qualify.
In order to file bankruptcy in Florida, you must have lived in Florida either for over 180 days or the greater portion of 180 prior to filing. But that’s just the filing requirement.
To use Florida exemptions, you must live in Florida for at least 730 days before you file.
If you don’t meet these requirements, you can still use the exemptions for the state where you lived before. Many states also enable you to choose the federal exemptions if you prefer.
Your social security and veterans’ benefits should still be safe under federal law. You will want to speak with a good Florida bankruptcy attorney about the status of private disability benefits.
Call Us for a Free Bankruptcy Consultation
If you are receiving disability benefits, we understand that you do not want to jeopardize monthly income or any lump-sum payment you may have received. Nobody should file a Chapter 7 or a Chapter 13 bankruptcy without having all their questions answered. You need to know what to expect. When it comes to bankruptcy, there shouldn’t be any surprises.
At Ziegler Diamond Law, we are happy to answer all your questions. We want to help you have peace of mind and make the right decision.
If you are considering bankruptcy, contact the experienced Florida bankruptcy lawyers at Zeigler Diamon Law for a free consultation. Fill out and submit this form. Or just call us directly at (727) 538-4188 in Clearwater, (813) 225-3111 in Tampa or (352) 600-1326 in Mt. Dora.
