A common question people ask is whether they can file for bankruptcy if they receive Social Security benefits. People who receive government assistance checks are just as eligible for bankruptcy as the next person. Bankruptcy is a process designed to help anyone in serious financial trouble resolve their debt troubles and obtain a fresh start to their financial future.
Many people that rely on Social Security benefits do so because they lack the resources necessary to make ends meet on their own, so it is no surprise that some of these people my need to also rely on bankruptcy to get help.
Bankruptcy and Benefits
Although people who receive government assistance have the right to file for bankruptcy, they may not have to. A person that is unable to work may not need to file for bankruptcy to resolve their debt troubles because they may be considered “judgment proof.” Someone who is deemed judgment proof is legally protected from collection lawsuits filed by creditors, which means that they are already protected from collection efforts without the need for bankruptcy. This also means that creditors are rarely able to recoup debts owed from a person whose only source of income is Social Security benefits.
The exception to this rule is in the case of secured debts, which will require repayment if the person intends on keeping the property. Resolving secured debts can be managed through a Chapter 7 bankruptcy, in which the filer is able to split a portion of the debt into unsecured and be written off while the other portion remains secured and becomes part of a Chapter 13 repayment plan. Anyone who relies on Social Security checks and is considering filing for bankruptcy should consult a bankruptcy attorney.