You may be wondering if Supplemental Security Income is included as disposable income for bankruptcies. The quick and concise answer is: No, Supplemental Security Income (SSI) is not included as disposable income in bankruptcy proceedings.

When individuals receiving SSI consider filing for bankruptcy, they often wonder how their benefits might be affected.

This article explores the treatment of SSI in bankruptcy, outlining federal protections and providing useful insights on how to safeguard these benefits through the process.

 

Key Points On Supplemental Security Income and Bankruptcy

1. SSI is Generally Excluded from Disposable Income Calculations: In both Chapter 7 and Chapter 13 bankruptcies, SSI is not counted as disposable income, which means it is protected from creditor claims.
2. Federal Law Offers Extensive Protection: The Social Security Act and U.S. Bankruptcy Code both exempt SSI from use in paying creditors, allowing recipients to keep these benefits for their basic needs.
3. SSI Reporting Requirement: While SSI must be reported during bankruptcy filing, it remains exempt from payment calculations in both types of bankruptcy, ensuring recipients do not lose access to this critical income.

 

 

How Supplemental Security Income Is Treated in Chapter 7 and Chapter 13 Bankruptcy

When filing for bankruptcy, it’s important to understand how Chapter 7 and Chapter 13 handle income differently. A key concern for SSI recipients is whether their benefits will count as disposable income. Fortunately, SSI is protected under federal law, allowing recipients to keep these funds.

Each type of bankruptcy provides protections, though they apply differently.

Chapter 7 Bankruptcy and the Means Test Exemption for SSI

Chapter 7 bankruptcy is designed for individuals with limited income who need relief from unsecured debt. To qualify, applicants must pass a means test, which measures disposable income. However, SSI is excluded from this calculation, making it easier for those who rely primarily on SSI to qualify for Chapter 7, even if they have limited additional income.

Chapter 13 Bankruptcy and the SSI Exclusion in Repayment Plans

In Chapter 13 bankruptcy, filers agree to a structured repayment plan spanning three to five years. SSI, however, is not counted as disposable income and is therefore excluded from repayment requirements in Chapter 13 cases. This exclusion means that SSI recipients are not required to use their benefits to pay creditors under the repayment plan, allowing them to retain these funds.

For a clearer understanding of how SSI is treated in Chapter 7 and Chapter 13 bankruptcies, the table below provides an overview of key factors. This highlights the consistent protections afforded to SSI recipients across both types of bankruptcy filings.

 

Aspect	Chapter 7 Bankruptcy	Chapter 13 Bankruptcy
Means Test Requirement	Required, but SSI is excluded from calculation	Not required
SSI as Disposable Income	Excluded from disposable income	Excluded from disposable income
Required Reporting of SSI	Must report SSI income	Must report SSI income
Protection Under Social Security Act	Yes, protects SSI from creditors	Yes, protects SSI from creditors
Impact on Repayment Plan	N/A	SSI cannot be required for repayment
Recommended Action	Keep SSI in a separate account to maintain full protection	Keep SSI in a separate account to maintain full protection

 

Reporting Supplemental Security Income in Bankruptcy Filings

It is essential to declare SSI accurately when filing for bankruptcy since it serves as assistance for those with low income and is shielded from creditor claims. To preserve the benefits and guarantee transparency, Schedule I must include SSI during the bankruptcy process.

To ensure that your SSI remains protected, keep these funds isolated from any other sources of income you may have. Mixing them could put their secure status at risk. Depositing them into a separate account designated for SSI can help maintain their protection.

For proof of origin during bankruptcy proceedings, maintaining records of disability payments that have not yet been spent is critical. Properly documenting these funds and managing the dedicated account ensures the safeguarding of your Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) when undergoing filings.

 

Separate Accounts for Protecting Your SSI During Bankruptcy

By keeping supplemental security income benefits in a separate bank account, you can help prevent complications in bankruptcy proceedings and ensure that creditors cannot mistakenly access these funds. If you’ve already combined SSI with other income, consulting a bankruptcy attorney can help identify additional protections to maintain the exemption.

 

Steps to Prepare Before Filing for Bankruptcy

For SSI recipients considering bankruptcy, proactive steps can simplify the process and reinforce the protection of SSI:

• Organize Financial Records: Document all income sources, including SSI, wages, and other earnings, to ensure SSI is reported accurately as exempt income.
• Consult a Bankruptcy Attorney: Bankruptcy laws vary by state, and professional guidance can clarify state-specific protections that may apply to SSI and other assets.
• Prepare for the Means Test (if Filing Chapter 7): Knowing which income is considered in the means test can help with eligibility. Since SSI is excluded, recipients relying mainly on SSI may find it easier to qualify for Chapter 7.

 

Other Protected Government Benefits in Bankruptcy

In addition to SSI, other government benefits are also exempt from creditor claims during bankruptcy, which can offer further support:

• Social Security Disability Insurance (SSDI): Like SSI, SSDI is protected by federal law and cannot be used to pay creditors.
• Veterans Affairs (VA) Benefits: VA benefits are typically exempt, ensuring veterans’ essential income is protected.
• Unemployment Benefits: Although state-specific rules apply, unemployment benefits are often shielded from creditors, allowing individuals a baseline of financial security.

Understanding the protections for these benefits can help you make informed choices about bankruptcy and maintain access to essential resources.

 

Get Professional Help with Supplemental Security Income Protections in Bankruptcy

Bankruptcy can relieve debt without compromising SSI benefits, thanks to federal protections that exclude SSI from disposable income requirements. Whether filing for Chapter 7 or Chapter 13, SSI recipients can rest assured that these funds will generally remain secure and available for their essential needs.

If you’re considering bankruptcy and want to ensure your benefits are fully protected, Morgan & Morgan can help. With expert legal advice on SSI and bankruptcy, their team can provide the guidance needed to preserve your rights. For a free no-obligation consultation, contact us at 706-548-7070 to discuss your options and protect your financial security.

 

Related content:

• How Much Cash Can You Keep When Filing Chapter 7?
• What Do You Lose When You File Chapter 7 Bankruptcy?
• What Happens to My Secured Debt if I File Chapter 7?
• Georgia Bankruptcy Exemptions Explained

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FAQs About Bankruptcy and Disposable Income

What Income is Considered Disposable in Bankruptcy?

Disposable income typically includes wages, business earnings, and other non-exempt sources, but SSI is federally protected and therefore excluded.

Why Should SSI Be Kept in a Separate Account?

Keeping SSI separate maintains its exempt status, reducing the risk of it being mistakenly accessed by creditors.

Can I File for Chapter 7 Bankruptcy if I Rely on SSI?

Yes, since SSI is excluded from the means test calculation, applicants who rely on SSI can still qualify for Chapter 7 if their other income is within eligibility limits.

What Other Benefits Are Exempt in Bankruptcy?

Other government benefits, such as SSDI, VA benefits, and unemployment benefits, are often protected during bankruptcy, though state-specific regulations apply.

How should I report SSI in my bankruptcy filing?

You should report SSI on Schedule I of your bankruptcy filing, ensuring that these funds remain separate from other income to preserve their protected status.

This will help safeguard your benefits throughout the bankruptcy process.

What are the consequences of misreporting supplemental security income during bankruptcy?

Misreporting SSI during bankruptcy can result in serious legal consequences such as fines, imprisonment, and the potential forfeiture of exemptions.

It is critical to accurately report all income to avoid these repercussions.

Can supplemental security income be used to repay creditors in Chapter 13 bankruptcy?

SSI benefits cannot be used to repay creditors in Chapter 13 bankruptcy, as they are not included in the debt repayment plan calculations.