Though you may be receiving aid via Social Security Disability Insurance (SSDI) benefits, the severity of your disability may still make it difficult to adequately support yourself. And if you find yourself in a dire financial situation, then you may even go as far as considering a bankruptcy declaration. However, you may be held back by the fear that a bankruptcy trustee will ultimately take away your SSDI benefits payments to pay back your creditors. Fortunately, federal law typically protects SSDI benefits during bankruptcy proceedings, though there are still important steps you can take to shield your income and assets. Read on to discover the possibility of losing your benefits upon your bankruptcy filing and how a seasoned New Jersey SSDI attorney at The Law Offices of Sheryl Gandel Mazur can help protect you from this.
Is It Possible to Lose SSDI Benefits in Bankruptcy?
The short answer is that it is unlikely that you will lose your SSDI benefits upon your bankruptcy filing. This is because the federal bankruptcy code bars courts from taking these funds.
How SSDI Benefits are Protected During Bankruptcy
- Federal bankruptcy law generally prohibits creditors and bankruptcy trustees from seizing SSDI benefits during bankruptcy
- SSDI benefits are generally considered exempt assets during bankruptcy
- SSDI payments typically do not count towards the bankruptcy means test
- The SSA is generally prohibited from redirecting payments to creditors
- You may still need to prove which funds in your bank account came from SSDI benefits
- Keeping SSDI funds separate from other assets can help protect them during bankruptcy
What Bankruptcy Issues Must SSDI Recipients Understand?
As you likely already understand, declaring bankruptcy is a serious decision with serious repercussions. Not only might you run the risk of losing certain assets and properties, but you may also damage your credit score and have this incident publicly disclosed on your credit report for years to come.
In many bankruptcy cases that involve SSDI recipients, courts and trustees must distinguish protected benefits from non-exempt assets. As such, it’s in your best interest to maintain detailed records and separate SSDI funds to ensure these deposits remain federally protected during the bankruptcy process.
Important Financial Considerations Before Filing Bankruptcy
- Bankruptcy typically causes a considerable negative impact on your credit score
- Chapter 7 filings will remain on credit reports for ten years
- Chapter 13 filings will remain on credit reports for seven years
- Eligibility for Chapter 7 bankruptcy depends on a means test
- Investment accounts and other assets may not receive the same protections as SSDI benefits
- Creditors are generally prohibited from garnishing SSDI benefits
What Alternatives Exist in Essex County Besides Bankruptcy in Essex County?
It’s important to understand that there may be alternative options to bankruptcy, depending on your circumstances. Because bankruptcy can have considerable, long-term impacts on your credit score, it is often a last-resort option for those in New Jersey. As such, familiarizing yourself with other options can help you determine the best course of action for your financial situation.
Alternatives That May Help SSDI Recipients?
- Debt management
- Debt consolidation
- Debt settlement negotiations
- Filing a personal injury claim if your injury or disability was caused by another person’s negligent actions
- Applying for government assistance
- Seeking financial guidance before applying for bankruptcy
Can My SSDI Benefits Increase in New Jersey?
In some circumstances, informing the Social Security Administration about considerable life changes may result in an increase in monthly benefits or the implementation of additional financial assistance.
Life Changes That Can Impact SSDI Benefits
- A spouse’s death
- The death of an adult child
- Hitting retirement age
- Becoming eligible for Supplemental Security Income (SSI)
- Earning additional work credits?
What Government Assistance Programs Can Help in Addition to SSDI?
Those facing financial hardship in Essex County and the surrounding North Jersey communities who are considering bankruptcy while receiving SSDI benefits may be eligible for additional assistance programs. As such, you should consider both federal and state programs, as these can help reduce financial strain.
Government Programs That May Provide Additional Assistance
- Supplemental Security Income
- Medicare or Medicaid
- Temporary Assistance for Needy Families (TANF)
- Supplemental Nutrition Assistance Program (SNAP)
- Utility assistance programs
- Housing assistance
Contact an Experienced Essex County SSDI Lawyer Today
The best way you can ensure your financial protection is by retaining the services of a competent New Jersey SSDI attorney. At The Law Offices of Sheryl Gandel Mazur, our team proudly represents clients throughout New Jersey, including Essex County, Morris County, Passaic County, and Bergen County, fighting for the disability benefits they deserve. If you need assistance during this process, do not hesitate to contact our team today to learn how we can represent you during these difficult times.
