How Bankruptcy Can Help You Get Your Finances Back Under Control And Save Your Social Security Income.
Social Security payments can provide a vital source of income for those who can no longer work, whether because they have reached the age of retirement and chosen to retire, they have become injured, or they have some other condition that keeps them out of work. But Social Security is not a huge source of income, and many people have to find ways to supplement it, or they struggle.
It’s not uncommon for people to turn to credit to make ends meet. But when they are living on a limited income, they have fewer opportunities to pay back that credit, and the debt just compounds. Eventually, they may get in over their heads with debt they cannot repay, and they may face legal action. To start, creditors may initiate proceedings to seize assets, such as bank accounts or tax returns. Filing for bankruptcy can put a stop to such action, as well as provide the debt relief needed.
Fortunately, Social Security income is considered exempt, so creditors cannot legally seize them. However, there are many ways that creditors can end up seizing them because the person made some missteps without realizing it. Here are a few of them:
Most people don’t set up a separate bank account for every source of income they have. So, if they get Social Security income, they just put it right into their bank account with the rest of their money. What that means when creditors come calling is that there is no real way to determine which money is the exempt Social Security income and which money is free to be taken.
The best thing you can do to protect Social Security income from creditors is to put it into a dedicated bank account. There will be no question about the source of the funds, and they will be completely untouchable by your creditors.
Not Depositing Your Social Security Directly
Setting up a direct deposit for your Social Security income creates an easily verifiable trail. When your creditors file a Writ of Garnishment, officials will look at the account to be garnished, and if your Social Security has been on direct deposit, they will be able to see clearly and quickly that the funds in the account are protected.
In contrast, getting a paper check and then deposit it will not provide the same “proof.” The account will have a record of deposits, but they will not be clearly identified as being Social Security income. Officials would have to drill down on the deposits to find the details, and they are not likely to do that. Setting up direct deposit is an easy way to create that easily identifiable trail to protect your income.
Not Taking Action Early Enough
Filing for bankruptcy triggers what is known as an automatic stay, which immediately puts an end to any legal action by your creditors. If you know that you are struggling with debt, filing for bankruptcy can prevent your creditors from moving against you and taking action like garnishing your wages, seizing your accounts, or taking your other assets.
You might be able to put a stop to your bank account being taken, and you may even be able to get back money that was taken if it was considered exempt, but that will take a lot of work, and it can be a lot of time before you get that money back. Filing for bankruptcy before that action begins can save you a lot of trouble, while also getting you the debt relief you need quickly.
Chapter 7 bankruptcy allows you to completely discharge all your unsecured debt if you qualify, including things like credit cards or medical bills. Chapter 13 bankruptcy can restructure your debt under a more affordable payment plan, and it can discharge some of your debt at the end of that plan. Talk to an experienced Gilbert bankruptcy attorney to learn more about how bankruptcy protection might be able to help you get your finances back under control and save your Social Security income and other assets.
Gilbert Bankruptcy Lawyers are ready to help. Call us today to schedule a consultation with a bankruptcy attorney and learn more about how bankruptcy protection may help you. One of our attorneys will review your finances and help you understand the best path forward to get the maximum debt relief possible. Call us today to learn more.