If you've suffered an illness or injury that has left you unable to work, you may have fallen behind on your monthly bills or taken on debt in an effort to keep your head above water. And if you don't have the requisite earnings or work credits to qualify for Social Security Disability (SSD) payments, you may be wondering whether you have any other income options. Fortunately, there's another type of disability benefit that may be available once you've exhausted your other assets or declared bankruptcy. Read on to learn more about how filing for bankruptcy may help make additional federal disability benefits available to you.
When may you not qualify for SSD benefits?
Social Security Disability is a federal fund designed to provide monthly payments to replace a portion of one's income when he or she is no longer able to work due to disability. Like Social Security retirement, the amount of SSD benefits you'll receive depends largely upon your reported work history. If you've worked fewer than 5 of the last 10 years and are 31 years old or older, you may not qualify for SSD. However, if you're younger than 31 and have worked at least half the number of years since you turned 21, you should still qualify.
If you don't qualify for SSD benefits, you may be able to receive Supplemental Security Income (SSI) benefits instead. SSI is intended to provide a subsistence-level wage to those who don't have the required credits for SSD but who cannot hold down work due to a disability. However, because SSI is intended to serve as subsistence income only, it has some strict asset limits -- having too much money in the bank could disqualify you from receiving SSI until these funds are spent.
Currently, in order to receive SSI benefits, you'll be limited to no more than $2,000 in "countable assets," or $3,000 if you're married or living with another adult. These assets can include bank and investment accounts, but generally exclude your home, vehicle, and most personal property.
Can filing for bankruptcy allow you to receive SSI benefits?
If a medical issue has put you out of work, your debt may be rising far faster than you can stretch your remaining assets, and bankruptcy may appear to be your next step. If you're currently disqualified from receiving SSD due to an insufficient work history, and prevented from receiving SSI due to too many assets, declaring bankruptcy may render you eligible for SSI benefits by reducing your available assets or using them to repay your debt.
In most cases, a Chapter 7 bankruptcy will be your best option, rather than a Chapter 13. In a Chapter 7 bankruptcy, your available assets are liquidated and distributed to your creditors in order of priority. Any debt that isn't able to be repaid through the liquidation of your assets is written off by the creditor, and you're no longer responsible for repayment of this debt.
A Chapter 13 bankruptcy involves a structured repayment plan rather than liquidation. The bankruptcy trustee will gather information on all your assets and debts, and will then require you to pay the majority of your monthly income to the trustee so that he or she can distribute it to creditors in order of priority. After your repayment plan has ended, any debts that remain may be discharged or reaffirmed.
Many of the Chapter 7 exclusions overlap with SSI asset exclusions -- so you should still be able to keep your car, your home, and certain personal possessions even after filing bankruptcy. Other assets may be seized by the trustee and used to repay secured debts, and in many cases, this asset seizure will help get you below the $2,000 SSI threshold and allow you to begin receiving regular disability income.
In addition, because Social Security payments are generally exempt from garnishment or attachment by creditors, you'll be able to avoid these processes and retain your disability income even if you find yourself slipping back into debt in the future. For more information, you should contact an experienced bankruptcy attorney in your area.