What Happens to Disability Benefits in Personal Bankruptcy Cases?
If you are currently receiving disability benefits and planning to file for bankruptcy in South Florida, or if you are intending to file for disability benefits or have an application pending, it is essential to understand how a bankruptcy filing could affect your disability benefits. Generally speaking, most disability benefits are “exempt” in a bankruptcy case, which means they cannot be liquidated in a Chapter 7 case, and they may not impact the terms of a repayment plan in a Chapter 13 bankruptcy case. Yet you should understand that all disability benefits are not classified the same way, and it will be important to understand how different types of disability benefits are “exempt” under applicable federal and state bankruptcy laws. Our West Palm Beach bankruptcy lawyers can explain.
Exemptions for Benefits Received Under the Social Security Act
Under federal law, disability benefits that a person receives through the Social Security Administration (SSA) are exempt. In Florida bankruptcy cases, even though a debtor will use state exemptions, federal law does protect disability benefits through the SSA. Those disability benefits include those through the Social Security Disability Insurance (SSDI) program, as well as those through the Supplemental Security Income (SSI) program. You do not have to worry about SSDI or SSI benefits being liquidated in a Chapter 7 case, to be clear.
Protections for Veterans Disability Benefits Under Federal Law
Federal laws also protect veterans’ disability benefits in bankruptcy cases. Whether a debtor is planning to file for Chapter 7 or Chapter 13 bankruptcy, the Honoring American Veterans in Extreme Need Act of 2019 (the HAVEN Act) excludes disability benefits paid through the Department of Veterans Affairs and the Department of Defense from the calculation of a debtor’s monthly income. Veterans’ disability benefits are also exempt in bankruptcy cases.
Florida Law Exempts Many Private Disability Benefits
The exemption of private disability benefits, such as through an employer, are also likely to be exempt in Florida, but you should confirm this with an attorney before you make any assumptions. Exemptions for private disability benefits largely occur based on state law. There are some states that have specific exemptions for private disability benefits, and there are others that do not.
Section 222.18 of the Florida Statutes specifically exempts “disability income benefits from legal processes.” This section states: “Disability income benefits under any policy or contract of life, health, accident, or other insurance of whatever form, shall not in any case be liable to attachment, garnishment, or legal process in the state.”
However, it is nonetheless important to discuss private disability benefits with an attorney to ensure that they meet the definition set forth in the Florida Statutes.
Contact Our West Palm Beach Bankruptcy Attorneys Today
If you have any questions about any type of disability benefits in Florida in relation to a bankruptcy filing, an experienced West Palm Beach bankruptcy lawyer at Kelley, Kaplan & Eller can provide you with answers and additional information. Do not hesitate to get in touch with us to learn more about your bankruptcy options or to begin working on your bankruptcy petition with one of our attorneys.
Sources:
law.cornell.edu/uscode/text/42/407
congress.gov/bill/116th-congress/senate-bill/679
flsenate.gov/Laws/Statutes/2011/0222.18
