Blog Layout

SICK AND BROKE: BANKRUPTCY ADVICE FOR SOCIAL SECURITY DISABILITY CLIENTS

May 08, 2014

Applying for Social Security Disability benefits can mean facing two or more years of loss of income.  How should someone dealwith this financial crisis?  Bankruptcy can give some relief, but the timing is important and depends on a number of factors:

            1.  Is the Claimant single or married?

            2.  Does the Claimant have assets at risk?

            3.  Does the Claimant have medical coverage of some kind?

If a Claimant is single and has no assets, then she is the proverbial turnip out of which no one can get any blood!  There is no immediate need to file a bankruptcy, and if Claimant has no insurance and could need more testing, surgery or treatment, then she should not file bankruptcy during the two years plus it takes to get on benefits.  A person can file a Chapter 7 bankruptcy only once every eight years, and you want to be able to include all foreseeable medical bills.

Social Security benefits cannot be garnished by the typical creditor.  A government debt for taxes, overpayment of federal benefits or student loans can be the exception to the rule.  The benefits once received, even a large back pay amount, can be protected in a bankruptcy, as long as those funds are not co-mingled with other money.  Keep them in a separate bank account, and they will be exempt from attachment.

Claimants should also be aware of the Preference rule in bankruptcy.  Often Claimants rely on the kindness of family and friends to support them during the long wait for disability benefits.  There is the natural inclination to pay those people back immediately with past due benefits when received in a lump sum.  However, if bankruptcy is going to be filed to get rid of other debt like credit cards, medical bills, payday loans, etc, DO NOT pay back family prior to the bankruptcy.  That would have to be disclosed for one year from the time of payment, and they would be at risk of having to pay that money back!  The better course of action is to list the family and friends as creditors, and after the bankruptcy is final, and the disability benefits are exempted, the Claimant can pay back whomever they desire with no problem.

If a Claimant has assets, then they might need to be liquidated merely to survive the long wait for benefits.  Sales of assets have to be disclosed for the previous two years to a bankruptcy filing.  DO NOT merely transfer assets to family or friends to try and “protect” them.  Most states (including Illinois and Missouri) have a Uniform Fraudulent Conveyance Act that can recover such transfers for up to four years.  Sales for fair market value are perfectly acceptable.

  If a Claimant is married, and that spouse is working, their wages could be at risk if they are sued for joint debts.  Most states view medical bills as a joint debt, regardless of who received the services.  Thus they should sit down with an attorney and go over their monthly budget to see if a Ch 7 or Ch 13 bankruptcy would be the most appropriate under the circumstances.

22 Sep, 2023
It is rather common for a client to come in with a letter from their health care provider. Frequently these people have filed their own applications for Social Security benefits and submitted this letter with their application. They are bewildered and crestfallen when they are turned down by the Social Security Administration. If they haven’t […] The post Doctor’s Letters appeared first on Dempsey, Dempsey & Hilts P.C..
26 Jul, 2023
The dismal performance of the Social Security Administration in processing and paying Social Security Disability and SSI claims continues to generate interest in the national media. Lisa Rein, a reporter for the Washington Post, has done a great series of articles about the SSA and has shed light on a system in chaos. She writes […] The post Social Security Disability Expose in the Washington Post appeared first on Dempsey, Dempsey & Hilts P.C..
06 Mar, 2023
We Got an Award! Dempsey, Dempsey and Hilts received an award from the group, Social Security Disability Leadership. We were recognized as one of the top 500 firms in the nation. In fact, according to the Social Security Administration, we are 305th in the nation for 2022 in number of Social Security Disability and SSI […] The post Disability Newsletter – Winter 2023 appeared first on Dempsey, Dempsey & Hilts P.C..
30 Aug, 2022
Social Security Hearings – Still on the Phone!  We are continuing to have Social Security Disability and SSI hearings on the speakerphone. Terrell and Vicki Dempsey attended the National Organization of Social Security Claimant Representatives conference in Austin, Texas in May. Dr. Kilolo Kijakazi, the Acting Commissioner of the Social Security Administration, told the conference […] The post Disability Newsletter – Summer 2022 appeared first on Dempsey, Dempsey & Hilts P.C..
10 Jan, 2022
Good News on the Appellate Front – A significant change has occurred with a new administration. We are seeing a significant number of the U.S. Attorneys agreeing to remand cases we appeal to the U.S. Federal District Court!  The post Disability Newsletter – Winter 2022 appeared first on Dempsey, Dempsey & Hilts P.C..
23 Aug, 2021
The Social Security Administration is continuing to conduct our Social Security Disability and SSI hearings by phone. The administration has been offering to have online hearings through Microsoft Teams, however, the vast majority of our clients do not have sufficient access to computers or high-speed internet to use this option…  The post Disability Newsletter – Summer 2021 appeared first on Dempsey, Dempsey & Hilts P.C..
08 Jan, 2021
We are proud to announce that Courtney Hilts, Esquire is now a partner as you can see from the name at the top of this letter. Mrs. Hilts, formally Shelley, grew up in rural Colchester, Illinois. She is a 2007 graduate of West Prairie High School. She graduated from the University of Illinois, Springfield in May […] The post Disability Newsletter – Winter 2021 appeared first on Dempsey, Dempsey & Hilts P.C..
27 Jul, 2020
Covid! Covid! Covid! Just like everyone else in the United States, the Social Security Administration and our office is struggling to cope with the Covid-19 pandemic. The Social Security Administration sent everyone home. We kept our offices open with facemask/social distancing requirements. Thankfully, none of us have been infected by the virus. Like most of our friends […] The post Disability Newsletter – Summer 2020 appeared first on Dempsey, Dempsey & Hilts P.C..
20 May, 2020
The following is an update from the National Association of Consumer Bankruptcy Attorneys: As a majority continue to follow stay at home orders due to the COVID-19 crisis, NACBA’s Legislative Committee with support from NACBA’s Board of Directors have been working nonstop with House and Senate staff to ensure significant bankruptcy provisions were included in […] The post What the HEROES Act Could Mean for Bankruptcy appeared first on Dempsey, Dempsey & Hilts P.C..
30 Apr, 2020
Written by Nancy Altman: The CARES Act was intended to provide emergency payments as quickly as possible. Yet over a month after the bill became law, those emergency payments are not yet all out the door. Even for those who’ve received them, $1200 emergency payments for eligible adults and $500 emergency payments for each eligible dependent child […] The post Let’s Make Sure The COVID-19 Response Doesn’t Threaten Social Security appeared first on Dempsey, Dempsey & Hilts P.C..
More Posts
Share by: