Should You File for Bankruptcy If You’re on Social Security?

You’re getting nonstop calls and letters from creditors, making you afraid to answer your phone or check the mail. No matter how much they cajole or demand, you can’t pay these debts because your only income is from Social Security. What can you do?

Many people in your situation would do nothing if they don’t have assets that a creditor can seize. Social Security income generally can’t be garnished, so no matter how many demands they make or lawsuits they file, there’s very little your creditors can do.

Maybe you want to deal with your debt situation now so that the calls stop and you no longer have to wonder whether the knock on the door is from yet another process server with a summons and complaint. If you decide to file for bankruptcy, being on Social Security won’t prevent you.

Chapter 7 vs. Chapter 13

Chapter 7 allows you to discharge unsecured debts like credit cards, utility bills, and medical invoices. The process is over in a matter of months, which is why more indebted consumers choose this option. You have to pass a means test to confirm that you don’t have enough disposable income to repay your creditors in a Chapter 13 plan, but if Social Security is your only income, this won’t be a problem for you.

The downside to Chapter 7 is that if you own any property that is not protected by an exemption, your bankruptcy trustee may seize and sell it to pay your creditors. If, for example, the equity in your home is not covered by a homestead exemption, Chapter 13 may be a better option.

With Chapter 13 bankruptcy, you don’t have to surrender this property, but you must repay all or a portion of your debts through a three-to-five-year payment plan. The only catch is that your income must be sufficient to fund the plan, which could be difficult if you are on Social Security.

Although you technically have nothing to lose if you ignore your creditors, they probably won’t stop harassing you or dragging you into court for hearings and lawsuits. Saving the money to cover your bankruptcy costs and filing fees may be worth it. You may even be able to qualify for a waiver of the filing fees if you can’t afford to pay it upfront or in installments.

Contact an Oklahoma Bankruptcy Attorney

Before you decide to file for bankruptcy, it’s a good idea to meet with an Oklahoma bankruptcy attorney to discuss your case. At the Law Offices of B. David Sisson, we often work with clients on Social Security and understand how stressful it is when creditors demand money that you don’t have. Attorney B. David Sisson has been certified as a specialist in consumer bankruptcy law by the American Board of Certification and will advise you on the best way to handle your situation. For more information or to schedule a consultation with Attorney David Sisson, please contact us.

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