Chapter 7 Vs Chapter 13
In general, Chapter 7 bankruptcy is a faster process than Chapter 13 bankruptcy. Chapter 7 bankruptcy in San Diego will usually discharge within three months from filing. Typically, the case is closed shortly after entry of the discharge order. An individual or business can file Chapter 7 whereas only individuals can file Chapter 13.
But Chapter 13 comes with many benefits including the opportunity to repay mortgage arrears overtime, lower vehicle payments, reduce interest and avoid unsecured voluntary property liens. With the guidance of an experienced bankruptcy attorney from San Diego, you get out of debt and start fresh!
When Is The Ssi Overpayment Not Discharged
If you have filed Chapter 7 bankruptcy the Supplemental Security Income overpayment is discharged unless the SSA objects to the discharge and the court approves the exemption. This is very rare but could occur if the court determines the overpayment is to due to fraudulent actions. For example, if you collected Aunt Jennys SSI check for two years after Aunt Jenny died and the SSA is requesting that you repay the overpayment the court may agree.
Can I Discharge My Social Security Disability Overpayment In A Bankruptcy
In my law practice, I handle both Social Security disability cases and consumer bankruptcy matters.;; As such, I regularly get calls from other attorneys and potential clients about issues where these two practice areas overlap.
One of the most common questions I get has to do with the question of whether a Social Security disability overpayment may be discharged in a bankruptcy.; Overpayments occur when disability claimants continue to receive benefits even when they have returned to work or are otherwise not eligible for payment.
Often, the person receiving the payment does not know that he/she is not eligible.; Social Security has a number of programs designed to encourage disabled claimants to return to work, and most of these programs provide for several months of continuing disability payments while a claimant tries to return to work.
To call Social Securitys return to work programs confusing would be an understatement.;; For example a disabled person can attempt to work during a trial work period of up to 9 months during which time he will continue to receive his full disability benefit.;; A trial work month is one in which; you earn more than a designated amount .;; If you work 9 or less trial work periods in any 5 year period, your ongoing benefits are not at risk.; If you exceed 9 trial work months, then you may be cut off.
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Filing Bankruptcy Can Also Stop Garnishment For Ssi Overpayment
You did not specifically mention this as an issue, but its also important to note that if the SSA was attempting to collect an SSI overpayment from you and you filed for Chapter 7 bankruptcy, the SSA would cease all collection activity. The SSA office is also generally precluded from attempting to collect any SSI debt that existed prior to the bankruptcy filing.
Note: Although Chapter 7 bankruptcy may discharge certain unsecured debts such as medical bills, unsecured personal loans, and credit card debts, certain unsecured debts will remain after filing for bankruptcy protection. For example, debts such as spousal support and child support are not discharged.
Its worth noting, however, that noncustodial parents who are only receiving SSI benefits are generally not required to pay child support. Although this might seem unfair, the thinking is that an SSI payment is considered a welfare benefit and cannot be garnished for child support.
Employment Status When Filing For Bankruptcy
Chapter 7 and Chapter 13 each offer unique benefits to filers. The first allows filers to cancel debt quickly while the second lets people keep property in exchange for paying into a payment plan.
Because each chapter has different qualification standards, how your unemployment will affect your bankruptcy will depend on some of the following factors:
- how long youve been unemployed
- how much you made at your prior place of employment
- whether youll start another job soon
- whether you have another source of income, and
- whether you plan to file for Chapter 7 or Chapter 13 bankruptcy.
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What Will Happen To My Ssi If I Have An Overpayment
SSA will ask you to pay the full amount of the overpayment within 30 days. If you dont do this, and you are still eligible for SSI, then SSA will take the lesser of 10% of your total monthly countable income or your entire monthly income.14 SSA will start taking money out 60 days after you receive notice of the overpayment.; You can always negotiate a different rate of pay at any time.; For example, you can ask SSA if you can pay back $20 per month if thats all you can afford.; However, where Social Security thinks there has been fraud, they will not agree to a reduced payment.15
Debts You Can Discharge In Bankruptcy
Your overpayment may be one of many bills you owe. Depending on how much you owe and the likelihood that you can or cannot pay your debts, bankruptcy might be a wise decision. A bankruptcy discharge releases you from personal liability for certain kinds of debts.
- Secured debts mean theres collateral involved, like your house or car. You either have to pay to keep your home or car or turn them over to the creditor. A Chapter 7 bankruptcy allows you to give up the property. A Chapter 13 bankruptcy could allow you to extend your payment plan by three to five years.
- Priority unsecured debts lack collateral but must be paid in full during bankruptcy. These include taxes, child support, spousal support/alimony, criminal fines, and personal injury judgments. In Chapter 7 bankruptcy, you sell your assets to pay priority unsecured debts before paying non-priority unsecured debts. If you dont have enough assets to sell and pay off these debts, you might still owe them after completing the bankruptcy process.
- Non-priority unsecured debts such as medical bills, personal loans, past-due utilities, and credit cards can be discharged in Chapter 7 bankruptcy. For a Chapter 13 bankruptcy, you can pay pennies on the dollar before the remainder is discharged.
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Most Of The Time Social Security Benefits Are Protected From Garnishment
Most Americans can collect âSocial Securityâ when they reach a certain age. Social Security retirement benefits are made available when Americans become eligible. This usually depends on an individualâs age.
Aside from these benefits, there are two other types of Social Security income that act as supplemental security income. If eligible, you can collect these monthly benefits from the Social Security Administration.
What Does The Notice Of Overpayment Have To Contain
You have a right to receive a written notice if SSA thinks you have an overpayment. The notice must include the following information:13
- Why there is an overpayment;
- The amount of the overpayment;
- The month in which the overpayment occurred;
- A list outlining what amounts were paid and what should have been paid;
- The rate of adjustment to your SSI check if you do not pay in full and continue to receive SSI ;
- Your right to request a waiver and/or reconsideration
- How to request a waiver and/or reconsideration
- A notice will also be sent to your representative payee and/or a legal representative.
If a letter or a person from SSA tells you that you have an overpayment, but you did not receive the actual overpayment notice, ask SSA to send you one.
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You Might Not Qualify If Youre Newly Unemployed
Passing the means test can be challenging if youve recently lost a high-paying jobat least temporarily. Even if you arent earning anything currently, youll still have to report the amount you received during the prior six months on the means test, and if the figure is high enough, youll fail.
The solution? Wait a few months. If you remain unemployed, your six-month average income will drop quickly. Keep in mind, however, that youll have to report any unemployment earnings you receive.
Is A Social Security Overpayment Dischargeable In Bankruptcy
This scenario is unusual, but it can happen. A person will file for disability payments from the Social Security Administration . Payments come in, and the recipient deposits them. Sometimes, the persons health improves or he or she returns to work. At this point, the claimant is no longer eligible for disability, and Social Security should terminate the payments; however, like all institutions Social Security isnt perfect, and for some, the payments will continue coming in when they shouldnt. This can go on for quite a long time regardless of whether the claimant knows it should have ended. The continued payment after eligibility ceases is called overpayment.
When the SSA thinks it has been overpaying someone, it will send a letter to the claimant that does a few things.
It will explain why it thinks if overpaid the claimant.
It will demand its money back.
It will inform the claimant that he or she can demand a review to contest the SSAs demand for its money.
It will inform the claimant that he or she can request a full or partial waiver for repaying the SSA.
Generally, the SSA does not approve waivers, which may leave claimants on the hook for very large sums of overpayments they are required to return to the government. Occasionally, this can grow into tens of thousands of dollars. If the money no longer exists, can claimants file bankruptcy?
Are Disability Benefits Protected In Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, almost all of your property is considered property of the bankruptcy estate. This means that the bankruptcy trustee can take your nonexempt assets and sell them to repay your creditors. In most cases, state and federal bankruptcy exemptions protect your disability benefits from the Chapter 7 trustee. But the extent to which your benefits are protected depends on the source of your payments.
Social Security Disability Insurance Benefits
In general, both Social Security and bankruptcy laws protect your SSDI benefits if you file for Chapter 7 bankruptcy. If you receive ongoing monthly disability payments from SSDI, you will normally be allowed to keep your payments. In most cases, debtors need these benefits to support themselves and their dependents while they are unable to work. As a result, they are typically protected by both state and federal exemptions.
If you receive a lump sum payment for past disability benefits owed to you, you will have to trace the deposit and prove that it was an SSDI payment. Generally, all SSDI payments are protected in bankruptcy because they are received under the Social Security Act. However, certain bankruptcy jurisdictions have created an implied exception to this general rule. In those jurisdictions, the Chapter 7 trustee may be able to take the portion of your lump sum payment that exceeds the amount needed for your basic care, support, and maintenance.
Supplemental Security Income Benefits
When You Have To Pay Back Social Security Overpayments
Unless you receive money from the government yourself, such as social security benefits, you may not realize how often mistakes are made. In 2015, the Social Securitys inspector general reported disability overpayments totaling $16.8 billion over a 10-year period.; Many people are overpaid by the government. If this happens to you, its just a matter of time before the government comes back to collect those funds. When youre living on social security benefits, and your expected to pay back large sums of money you didnt expect to have to pay, this can cause a real hardship on you and your family.
Some government debts are nondischargeable in bankruptcy, but as long as there is no fraud involved, Social Security overpayments are not one of them. In Chapter 7 or Chapter 13 bankruptcy, the debt you owe to the Social Security Administration, , can be wiped clean. ;If you received a large amount of money from a social security overpayment and cant pay it back; contact a Debt Advisors bankruptcy attorney for more information.
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Can I Appeal An Overpayment And Stop Reductions From Happening
Yes, you can.; To keep getting your SSI without any changes, you must send in your appeal within 10 days of receipt of the notice of overpayment.16 SSA figures you will receive the notice no later than five days after the date on the notice. For example, if your notice is dated January 1st, SSA will assume you received it by January 5th. Your appeal must be filed by January 15th. ;If you appeal within 10 days, SSA will not reduce your benefit amount until a decision is made.; If you do not appeal within 10 days, you can still request an appeal within 60 days of receipt of the notice of overpayment.17 But the amount of your SSI will be reduced during the appeal.; See questions 12 and 18 for information on filing an Appeal.; For information on the steps in an appeal, see SSAs Publication on appeals, found at: .
Supplemental Security Income Overpayment And Bankruptcy
Recently on our disability forum a disability recipient asked, If I have been receiving Supplemental Security Income benefits and the Social Security Administration has determined I owe them money for an Supplemental Security Income overpayment can the SSI overpayment be discharged if I file for Chapter 7 bankruptcy protection?
What Is A Waiver And When Does It Make Sense For Me To File A Waiver
A waiver is a recognition that you really have an overpayment, and you request not to have to pay it back.; You will not have to pay back the overpayment if SSA grants your waiver request.22 If SSA denies your waiver request, you can appeal that denial.23
Request a waiver of the overpayment ONLY if you agree that you have an overpayment or you have lost an appeal challenging the existence of the overpayment.; Filing a waiver may mean you are admitting that the overpayment exists.
When requesting a waiver, you must show that the overpayment was not your fault and one of the following applies:24
You can ask for a waiver for any part of an overpayment. For instance, you did not report a change within the first 10 days of the following month but did so before the end of the month. ;You could ask for a waiver of all of the overpayment except the overpayment for month one.30
You can get a Request for Waiver Form by going to the SSA office, calling SSA and asking them to mail you one, or from the SSA website at: .
Protecting Your Social Security Benefits
Most creditors cannot garnish or take money from your Social Security check before it is deposited into your bank account. The problem is that once this money is combined with other money, a creditor with a bank levy can legally take it. You can get your protected income back, but this situation involves time and trouble that can be easily avoided with a little careful planning.
A simple solution involves keeping your Social Security in a different bank account. Receive your Social Security check by direct deposit in a special account and never put any other money in that account. This will eliminate any problems if a creditor ever uses wage garnishment or bank levy to collect a debt.
Any income, including Social Security, is potentially at risk once you get behind on credit card payments or medical bills. A creditor may try to collect the debt on its own or through third-party debt collectors. If this fails, it will file a lawsuit. If you fail to answer the lawsuit, you will lose and the creditor will get a default judgment.
A creditor with a judgment usually will seek a court order to garnish wages or a bank account. This can cause your Social Security to be at risk. If your Social Security is commingled or mixed with other income from another source, a bank levy to take money from your bank account may separate you from your protected income until you act to get it returned to you.
Chapter 7 Bankruptcy And Ssi Benefits
Fortunately, both SSDI and SSI overpayments are considered unsecured debts and are generally discharged if you file for Chapter 7 bankruptcy. In fact, the SSA notes in their SSDI regulations that if you are liable for repayment of a title XVI overpayment and you petition the Bankruptcy Court and include title XVI overpayment as an unsecured debt the SSA will immediately stop their collections efforts for that debt as soon as they are notified your Chapter 7 bankruptcy petition has been filed.
Furthermore, when the Chapter 7 bankruptcy is completed and the court has discharged the debts, the SSA will also be barred from continuing their debt collection efforts to recover the Supplemental Security Income overpayment.
What Is The Time Limit For Requesting A Waiver
There is no time limit for requesting a waiver. ;You can ask for a waiver at any time. ;You can even request a waiver after you paid off the overpayment.31 After you file a request for waiver, SSA will review your request and either make a favorable decision or hold a personal conference with you if it cannot make a favorable decision.32 You can also appeal a denial of a waiver.
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