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I need the correct law to cite, please?

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I live in the state of Indiana. Can anyone tell me what law I can cite to exempt my social security disability payments from my bankruptcy "estate" so the trustee cannot get his hands on it to distribute to my creditors? Thanks for any help!
 


BL

Senior Member
How are your disability Payments made to you ?

If by check , then just cash them .

If they are direct deposit , and co mingled with other income in your account, open a seperate account with ONLY your disabilty payments going to it .
Your statements will reflect what income is deposited .
( benefits continue to be protected under section 207 of the Act only as long as they are identifiable as Social Security benefits. This applies to money in a bank account where the only payments into the account are from direct deposit of Social Security benefits. )


Once you start direct deposit SAA probably won't let you go back tio receiving checks .

http://www.ssa.gov/

Question
Can Social Security benefits be garnished to pay a debt?

Answer
Section 207 of the Social Security Act (42 U.S.C. 407) protects Social Security benefits from assignment, levy, or garnishment. However, the law provides five exceptions:

Section 459 of the Act (42 U.S.C. 659) allows Social Security benefits to be garnished to enforce child support and/or alimony obligations;
Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows benefits to be garnished to collect unpaid Federal taxes;
Section 3402 (P) of the Internal Revenue Code allows beneficiaries to elect to have a percentage of their benefits withheld and paid to the Internal Revenue Service to satisfy their Federal income tax liability for the current year;
The Debt Collection Act of 1996 (Public Law 104-134) allows benefits to be withheld and paid to another Federal agency to pay a non-tax debt the beneficiary owes to that agency: and
The Tax Payer Relief Act of 1997 (Public Law 105-34) authorizes the Internal Revenue Service to collect overdue federal tax debts of beneficiaries by levying up to 15 percent of each monthly payment until the debt is paid.
The Social Security Administration's responsibility for protecting benefits against legal process and assignment usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under section 207 of the Act only as long as they are identifiable as Social Security benefits. This applies to money in a bank account where the only payments into the account are from direct deposit of Social Security benefits.

NOTE: Supplemental Security Income payments cannot be levied or garnished.
 
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Thank you, Blonde Lebinese!

I am currently NOT receiving SS disability payments. My problem is that I am awaiting a hearing before a judge to determine if my application will be approved or denied. However, the trustee in my bankruptcy case has demanded that SHOULD I be approved for SS disability payments, I HAVE TO give him any back pay of benefits from the time I was found eligibile for benefits up to the date I filed for bankruptcy because he says that money will be part of my "bankruptcy estate". He even told me I could SUE him to keep the money but it would cost me more than it was worth and I would have to pay HIS court costs. His attitude turned nasty when he found out there was a POSSIBILITY of an asset in my case, and I'm afraid I'll have to fight him to be able to keep my disability back pay, IF I'm approved. Thank you for the reference to the social security law on garnisheeing benefits. WHY does my trustee think he can have my SS disability benefits when the law seems to clearly state it can't be taken to pay creditors?
 

BL

Senior Member
Don't sign anything off to anyone .
Do not discuss your SSDI case with the trustee from now on. If you really need a good answer call SSA and ask them if you're approved , can any of your payments be taken in bankruptcy ?
Do not admit to having any possible assets. ( household or personal items ).

Read what I said before .

If you are found eligible , a lump sum will be sent to you from the date of filing . I would not keep it in the bank , but keep a record of receiving it , with the ck. # ( make a copy of the ck .) , and records of how it was spent ( so they can't later claim you were hiding assets ).
 
Thanks, Blonde, I'm going to do everything in my power to hang on to any lump sum I might receive. The irony of the whole situation is that had I been approved for SS disability from the start, I would not have had to declare bankruptcy. It's also ironic, isn't it, that on the one hand the government might be giving me something, but on the other hand, the government is trying to take it away. Hmmm...
 

acemagoo61

Junior Member
Similar Situation

Blonde Lebinese said:
Don't sign anything off to anyone .
Do not discuss your SSDI case with the trustee from now on. If you really need a good answer call SSA and ask them if you're approved , can any of your payments be taken in bankruptcy ?
Do not admit to having any possible assets. ( household or personal items ).

Read what I said before .

If you are found eligible , a lump sum will be sent to you from the date of filing . I would not keep it in the bank , but keep a record of receiving it , with the ck. # ( make a copy of the ck .) , and records of how it was spent ( so they can't later claim you were hiding assets ).

I have a similar situation only my SSDI is approved and I am waiting for the Retroactive pay and have yet to file for banckruptcy. I have asked SSA about banckrutcy and the retroactive and they said they did not know the answer, that I needed to get a lawyer. Talking to lawyers I have yet to find one that was positive of the position so of course none were aware of a case on point or any wording that would give you a warm and fuzzy. Blonde Lebinese said you needed a trail to the bank account to prove it was SSDI money to protect it. I have been trying to find out if this is truley the case and have yet to have any luck. I was also wondering if I use some of the SSDI to buy a car that will far exceed the exemption amount for automobiles, will the car be exempt property from the bankruptcy if I can show the paper trail of where the money came from and the fact that the asset (the automobile) was obtained with SSDI funds?

I went from making $80k to $100k a year to being homeless for a year and a half and in a homeless shelter for nine months. I was on state aid for almost two years, and where I am living now is only a room rented through a local relieve agency (housing trust). I definetly have no hidden assets, I just got a TV last month with my first check. I do not want my creditors to get my disabilty retroactive pay. The amount is large due to a long delay and appeals, I sufferd a lot in the interem.

What are the answers? How can I best protect this asset?

Keep it in cash and file bankruptcy?

Go ahead and buy the car I want, move, get furniture, cloths, pot, pans, bed, linen, ect. and just keep reciepts and proof where the money came from?


Forget about the creditors? Some (actually all but one, but that may be hard to proove) are past SOL. No creditors have contacted me since 8/2002.

If the money is protected, I want to file bankruptcy, if it could be at risk, why bother, it may well be worth it try to get past the SOL's on my creditors.
 
I know exactly what you're going through and hope I can give you some information to make you feel a little better. I sent an online question to SSA asking about my SSDI being "exempt" from bankruptcy (should I be approved) and they sent me back a memo referring to Section 207(a) of the Social Security Act, 42 U.S.C. 407(a). (If you put that..Section...all of it...in your search engine you should be able to pull it up and read about it). It basically states that any future payments of SSDI and "NONE OF THE MONEYS PAID OR PAYABLE"...shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."
Check out this website to find some references about the law:
http://policy.ssa.gov/poms.nsf/lnx/0202410001

Be sure you also read GN 02410.005 Bankruptcy Court Orders. There should be a link to it in the above address under Section D. Procedure.

I have found several court cases where the court has stated that SSDI benefits were exempt BEFORE filing bankruptcy and my trustee is admitting he can't have any payments I receive AFTER filing bankruptcy, so what's left???

Also, check out this Supreme Court case if you can find it: Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S. Ct. 590 (1973). The state of New Jersey wanted reimbursed for state aid they gave to somebody named Wilkes and the US Supreme Court said "On its face value, the SS Act in 407 bars the State of New Jersey from reaching the federal disability payments paid to Wilkes. the language is all inclusive: "None of the moneys paid or payable...under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process..." THE MONEYS PAID AS RETROACTIVE BENEFITS WERE "MONEY'S PAID...UNDER THIS SUBCHAPTER," and the suit brought was an attempt to subject the money to "levy, attachment....or other legal process." The Supreme Court said New Jersey could NOT have the money back.

So....I would venture a guess that you and I are both safe from the bankruptcy trustee trying to take that money. I feel better now that I've done a lot of research on the subject and I hope you will, too.

Be sure you file with the help of an attorney and that he is aware you will be getting these benefits so he can "exempt" them right from the start. GOOD LUCK!!

Also, put your retroactive payment in a separate bank account and use that money for "necessities" and keep your receipts just in case you are forced to justify what you've spent the money on. I wouldn't spend it all just to be rid of it because you're certainly going to need it just to survive past the bankruptcy.
 

acemagoo61

Junior Member
2farindebt said:
I know exactly what you're going through and hope I can give you some information to make you feel a little better. I sent an online question to SSA asking about my SSDI being "exempt" from bankruptcy (should I be approved) and they sent me back a memo referring to Section 207(a) of the Social Security Act, 42 U.S.C. 407(a). (If you put that..Section...all of it...in your search engine you should be able to pull it up and read about it). It basically states that any future payments of SSDI and "NONE OF THE MONEYS PAID OR PAYABLE"...shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."
Check out this website to find some references about the law:
http://policy.ssa.gov/poms.nsf/lnx/0202410001

Be sure you also read GN 02410.005 Bankruptcy Court Orders. There should be a link to it in the above address under Section D. Procedure.

I have found several court cases where the court has stated that SSDI benefits were exempt BEFORE filing bankruptcy and my trustee is admitting he can't have any payments I receive AFTER filing bankruptcy, so what's left???

Also, check out this Supreme Court case if you can find it: Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S. Ct. 590 (1973). The state of New Jersey wanted reimbursed for state aid they gave to somebody named Wilkes and the US Supreme Court said "On its face value, the SS Act in 407 bars the State of New Jersey from reaching the federal disability payments paid to Wilkes. the language is all inclusive: "None of the moneys paid or payable...under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process..." THE MONEYS PAID AS RETROACTIVE BENEFITS WERE "MONEY'S PAID...UNDER THIS SUBCHAPTER," and the suit brought was an attempt to subject the money to "levy, attachment....or other legal process." The Supreme Court said New Jersey could NOT have the money back.

So....I would venture a guess that you and I are both safe from the bankruptcy trustee trying to take that money. I feel better now that I've done a lot of research on the subject and I hope you will, too.

Be sure you file with the help of an attorney and that he is aware you will be getting these benefits so he can "exempt" them right from the start. GOOD LUCK!!

Also, put your retroactive payment in a separate bank account and use that money for "necessities" and keep your receipts just in case you are forced to justify what you've spent the money on. I wouldn't spend it all just to be rid of it because you're certainly going to need it just to survive past the bankruptcy.

Thank you for your advice. I have contacted a few attorneys and none cited that law. Most were unsure, not very comforting. The attorney I am thinking of hiring cites a New Hampshire law protecting SSDI benefits. Playing devils advocate I asked him what he would do if the trustee tried to seize the SSDI anyways. I was looking for appealing the decision based on the SSDI law and/or the New Hampshire state law. What he told me is that he would flip it (his term, not mine) from chapter 7 to chapter 13 and get a dismissal. I would dodge the creditors a couple more years and re-file when there was nothing they can take. This does not give me a warm and fuzzy. Luckily you have already talked to the trustee for your case and you know they are playing it straight. I am paranoid, I do know that legally they can not touch it, but even my lawyer admitted that there are times that a trustee attaches their own moral judgment and try’s to pull a fast one. He did tell me that he had to fight with a trustee and judge over a non SSDI settlement that was protected. He said he won, but even the fact that a trustee would do this makes me nervous. I feel vulnerable. You have to depend on a lawyer because they know and understand the system. Things being that way, how do you really know your representation is competent? Reading some horror stories about others in bankruptcy getting a lawyer who did the paper work incorrectly, leaving them filed but not dismissed from bankruptcy and then refusing their calls or telling them he’s done with the case does not help. Once you find the law protecting SSDI it is pretty straight forward. What recourse does someone have should their representation fail to fulfill the job they paid for competently? From other postings it sounds like if your attorney makes a mistake, if the trustee has the preverbal hair across his….. you have no recourse.

I guess I am looking for the correct way to handle the situation should the trustee ignore the SSDI rule and the judge lets them get away with it? Does citing a state law open up vulnerabilities the SSA law would not? I am trying to head of mistakes before they happen, so as not to be stuck and not know what to do should a problem occur in the application of the law. To the lawyers and the courts we are talking peanuts, for me we are talking everything. I can not afford a mistake. Once I hand it over to a lawyer it is in their hands, how do you know you have the right one? Feel as though I am playing Russian roulette.
 
I had my lawyer on the phone 2 days ago discussing my SSDI payment IF I GET IT, and asked him if he didn't interpret the social security law that "seems" to protect benefits from bankruptcy as doing just what it says and his words to me were "sometimes having just a little knowledge of the law can be a bad thing because nothing is ever as cut and dried as it appears". When I pushed him, he said "I haven't researched it yet". This really makes me mad because he's known since July 16 (our 341 meeting) that the trustee wants the money if I get it. You ask how do you know if you have good representation??? I think I got my answer! We first contacted, paid and gave all our paperwork to our lawyer in February yet he didn't file until June 2 (with no excuse other than "we're working on it"). Our 341 was July 16 and the trustee told him on that date to file an amendment including the "possibility of SSDI benefits", which he didn't do until September 19. Now it's been almost 4 months and the trustee hasn't responded to our amended schedule claiming the funds exempt and when I asked our lawyer if the trustee was bound by the rules of the creditors when amendments were filed and he also has only so many days to object to things declared as "exempt", our lawyer said he didn't know the answer to that either. My Social Security lawyer said our bankruptcy lawyer should have filed a motion for the trustee to rule on our amendment but he says the time to fight it is AFTER I get approved. What a nightmare!! I still do feel like the law is on my side, but if I have to pay someone else even more money to protect what's mine, I'm going to be REALLY upset! Mine was a "closed period of disability" lasting only 17 months and by the time I give my SS lawyer her 25%, I'm not going to have very much left over. Anyway - good luck to you. I will post again when I have a final answer in my case and you do the same! :)
 

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