Post-Bankruptcy Survival: Protecting Social Security Income From Creditors

How to Protect Your Social Security Income From Creditors

If you’re retired or disabled, then you’re probably receiving social security payments. Those payments cannot be garnished by creditors except for the payment of child support, tax debt or debts accumulated due to a social security overpayment/fraud etc.  Even if a debtor exited bankruptcy with some secured debt such as a car payment or mortgage, those creditors do not have the right to garnish social security payments in the case of a default.

However, creditors can sue a post-bankruptcy debtor for the payment on any defaults stemming from reaffirmed debt or post-petition debt even if the debtor’s income comes mostly from social security. Also, those same creditors can garnish the debtor’s bank account and seize income that is not from social security and sometimes they may mistakenly take social security income if it is not clear that it is exempt from seizure.  So how does a post-bankruptcy debtor protect their social security income from creditors?

  1. Do not ignore creditor lawsuits after bankruptcy. Even if your income is mostly from social security, you want to inform the creditor in writing that you are receiving the majority or all of your income from social security and that suing you would not be effective. If you’re lucky, the creditor will forgo the lawsuit if they feel that they won’t get any money out of you.
  2. If you have income from social security and other sources, keep a separate bank account. It can be hard to distinguish between social security income and other income once co-mingled in the same bank account.
  3. If it is too late to separate your bank accounts and a judgment has already been granted to a creditor immediately inform your bank in writing that the money in your bank account is exempt from garnishment.
  4. If you have a significant amount of money that comes from sources other than social security, you might want to negotiate a feasible payment plan to avoid a garnishment.