Are Social Securty payments on deposit in a bank exempt?

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Are Social Securty payments on deposit in a bank exempt?

Asked on June 13, 2009 under Bankruptcy Law, Colorado

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

The answer is "maybe". 

Bankruptcy "exemptions" cover which assets may be sheltered as part of a bankruptcy filing.  The applicable exemption law that applies in your case depends on your current residence, but could relate back to a former residence if you recently moved across state lines.  Many states have exemption statutes that shelter your right to receive future Social Security benefits, and protect already received benefits to the extent reasonably necessary to provide support and maintenance to the debtor or any dependant of the debtor.

That all having been said, there are problem areas in the regard:

  • Lump sum Social Security benefits received prior to filing bankruptcy that have been sitting in your bank account 
  • Lump sum Social Security benefits (representing past-due payments from prior months) that come into your bankruptcy estate after you file
  • Differences in treatment of Social Security disability and Social Security retirement
  • Social Security benefits (on-going or already received lump sum) that were voluntarily transferred from the claimant to an ex-spouse or child as part of a divorce settlement

Bottom line, without knowing more details it's hard to advise you further on this.  Your best bet is to speak with a bankruptcy attorney in your area.


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