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Despite best efforts, sometimes circumstances that are well beyond our control result in an overwhelming amount of accumulated debt. High medical deductibles associated with unexpected health issues, such as a prolonged illness, a newly diagnosed chronic condition or a surgery resulting from a fall, along with the ever increasing cost of prescription medications can add up to an enormous amount. Add to this, growing life insurance premiums and real estate taxes that far exceed your original mortgage payments from decades ago and you may find that your actual expenses far excede your monthly budget. In situations like these, bankruptcy is often a sensible solution that offers the opportunity to get your finances in order and start anew. Seniors who receive Social Security benefits often worry if filing for bankruptcy will affect their ability to receive disbursements. This question can be especially troubling if Social Security is their most significant or only source of income.

If you have Social Security benefits and you’re considering filing for bankruptcy, contact Sirody & Associates, experienced bankruptcy attorneys, for a free consultation. Call (410) 415-0445.

Social Security And Creditors
More than 60 million people, or about one in four people in the United States, currently receive Social Security benefits. Retired Social Security beneficiaries and their dependents rely on Social Security as part or all of their monthly income. Regardless of where you live in the United States, Social Security benefits are protected by federal law and may not be garnished by a creditor to pay for most types of debts such as medical bills and personal loans. However, other assets, such as a home, car or other property could be at risk for being seized by creditors if you don’t protect yourself. For this reason, it’s always advisable to keep Social Security benefits in a separate bank account so that the funds are not commingled with income from other sources, such as pension payments, cash gifts or investment disbursements.

Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, it’s possible to immediately stop all collection actions and wipe away virtually all debts. Although some debts are considered “nondischargeable”, most common debts such as credit card bills and medical bills can be eliminated through a Chapter 7 bankruptcy. However, not everyone will qualify for a Chapter 7 bankruptcy. In the state of Maryland, you must first determine if your income is greater than the median income for the state. This is referred to as the “means test”. Although a Social Security check automatically becomes property once you receive it, in the state of Maryland, you are not required to include Social Security benefits as part of your income when completing the means test calculation.

Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is a bit different from a Chapter 7 bankruptcy. Under a Chapter 13 bankruptcy, debtors are given an opportunity to establish a plan to repay debts over a 3-5 year period. A Chapter 13 bankruptcy can help you manage “nondischargeable” debts such as unpaid state and local taxes, child support and money borrowed on a credit card to pay debts. Chapter 13 bankruptcy can also help the debtor avoid foreclosure on their home. In a Chapter 13 bankruptcy, you will need to list all assets such as real estate property, cash, jewelry, sporting equipment and anything else you own. State laws determine which assets you get to keep during a bankruptcy, so again it’s very important to keep your Social Security benefits in a separate account so they aren’t mixed with other assets that could be seized.

Get Appropriate Help
Filing for bankruptcy is a time consuming and complex process. It’s advisable to find a highly qualified attorney who has extensive experience helping seniors fully evaluate their financial situation. It’s also very important to work with a bankruptcy attorney who will take the time to listen to you, to address any concerns that you may have and to fully explain your options. Contact us online for a free consultation or call (410) 415-0445. If bankruptcy is the best option for your particular situation, our experienced attorneys will work with you to collect all of the necessary documentation and guide you through the process, every step of the way.