Bankruptcy: How does filing bankruptcy affect my Social Security Benefits income?

An individual who files bankruptcy is only allowed to have up to a certain dollar amount in their possession on the date of filing of their bankruptcy petition. All money in a filer’s possession must be reported, regardless of whether the funds are located in or outside of a bank account. The allowed amounts recently increased with the amendment of Arizona Revised Statute § 33-1126(A)(9) from $150.00 to $300.00 in one bank account for each filer and from $300.00 to $600.00 in one bank account for married couple filers.

There are some exceptions to the rule that a filer only have a certain amount of money in one bank account on the date of filing and one of those exceptions include an individual’s Social Security Benefits. Pursuant to 42 U.S.C. § 407, Social Security Benefits are one-hundred percent (100%) protected in an individual’s bankruptcy. This means there is no dollar limit for the amount of Social Security Benefits a filer may have in a bank account on the date of filing. For example, if a filer received a back payment of Social Security Benefits in the lump sum amount of $30,000.00 prior to filing bankruptcy, these funds will be protected and cannot be touched by the bankruptcy trustee in the bankruptcy under 42 U.S.C. § 407.

While there is no cap amount for Social Security Benefits a Debtor may have in one bank account on their file date, these funds in most circumstances, cannot be commingled with non-exempt funds. This ensures no issues will arise in a filer’s bankruptcy proceeding with their appointed bankruptcy trustee… An example of non-exempt income includes but is not limited to: a filer’s employment income, pension income, income tax refunds, contributions from friends or family members and others source of funds.

There are many factors that must be properly addressed when it comes to an individual preparing to file bankruptcy. Too many times I’ve seen individuals file without an attorney and run in to troubles that easily could have been prevented had the person enlisted a knowledgeable and qualified attorney to assist with their bankruptcy matter. Contact Attorney Whitney G. Coats, Esq. at Dana Law Firm today, who will guide you through the bankruptcy laws and process and ensure you’re maximizing and retaining all possible assets.

Article By: Whitney G. Coats, J.D.                         


Whitney G. Coats, J.D., Of Counsel, is a bankruptcy attorney in Scottsdale, Arizona who works with the Dana Law Firm in its Consumer Bankruptcy Department. 

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