Bankruptcy and Disability Benefits: What to Know
Many individuals file for bankruptcy after sustaining a disabling injury or receiving a disabling medical diagnosis. Due to their disability, they are no longer able to work and to earn the same income they received prior to their disability, and as a result, their finances suffer. These bankruptcy filings often include a significant amount of medical debt, which debtors aim to have discharged in their bankruptcy cases. In some cases, especially for disabled adults who are also small business owners, it may be necessary to consider selling the business (if it is still profitable) or filing for business bankruptcy in addition to personal bankruptcy. Depending on the debtor’s circumstances and the structure of the business, it may be possible to file for just one bankruptcy case as an individual and for the business.
When a debtor who is receiving disability benefits decides to file for bankruptcy, they often have many questions about the relationship between bankruptcy and disability benefits. Our bankruptcy attorneys in West Palm Beach can tell you more.
SSDI and SSI Benefits Are Exempt
Public disability benefits, or those paid through federal programs administered by the Social Security Administration (SSA) including Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are exempt under federal law. Accordingly, your disability benefits will not be liquidated in a Chapter 7 bankruptcy and will not be counted toward your income.
VA Disability Benefits Are Exempt
VA or veteran’s disability benefits are also exempt. A recent change to the law allows veterans to exempt these disability benefits in a Chapter 7 bankruptcy, and it also allows veterans to qualify for Chapter 7 without counting their disability benefits toward income.
Florida Law Exempts Most Other Disability Benefits, Including Private Disability Benefits
Beyond SSA-administered disability benefits and other public disability benefits, it is important to know that some disability benefits are provided through private insurance policies. For example, Florida law also protects these disability benefits, which means that they are exempt in your bankruptcy case.
Determine Your Eligibility for Florida’s Bankruptcy Exemptions
It will be important to determine your eligibility for using Florida’s bankruptcy exemptions because not all states exempt private disability benefits. To be able to use Florida’s bankruptcy exemptions, you must have lived in Florida for at least 730 days prior to the date that you filed your bankruptcy petition. If you have not lived in Florida for that long, you can still file for bankruptcy in Florida (after living in Florida for 180 days prior to filing, usually), but you may need to use the exemptions for the state where you previously resided.
Contact a West Palm Beach Bankruptcy Lawyer Today
Anyone who is considering bankruptcy and is receiving any type of disability benefits or other kinds of public or private benefits, should seek legal advice. One of the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller can discuss the relationship between bankruptcy and disability benefits. To find out more and to begin working on your bankruptcy case, contact our firm today.
Sources:
law.cornell.edu/uscode/text/11
flsenate.gov/Laws/Statutes/2022/Chapter222/All
law.cornell.edu/uscode/text/42/407
