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Can creditors use my Social Security income to pay off debts?

On Behalf of | Oct 8, 2024 | Bankruptcy

You are a retiree who has worked all your life with few assets to call your own. And then, one day, you receive a letter reminding you of a debt that had accumulated due to negligence. You work through your assets and decide to pay off your debt using those, but it is still not enough, so to ease your payments, you file for bankruptcy.

Paying off your debts using your social security income

You recall the availability of your social security income and consider using it to pay off your debts. And while federal law exempts social security benefits to pay your creditors, you can use it. However, some important considerations are:

  • To use it voluntarily: If you opt for a Chapter 7 bankruptcy strategy, creditors cannot forcibly take your Social Security income. You are free to pay it as you please.
  • To include it in a repayment plan: In Chapter 13, wherein you create a repayment plan to pay back all or part of your debts over a specified time period, you can include your social security income to help meet your repayment obligations.
  • To set it up with strategic intentions: Filing for bankruptcy involves legal processes and is quite difficult to do on your own. A bankruptcy lawyer with experience handling these cases will give you the guidance to proceed in your best interest.

Your social security income plays a unique role in bankruptcy proceedings because it is exempt from being involuntarily taken. So, you should carefully consider how you can use it. A good thing to do is to consider taking advantage of what Chapter 7 or Chapter 13 can offer you. Also, having the proper support to help you make the right decisions is vital to getting you over the financial challenge.

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