Bankruptcy And Social Security Benefits
Social Security benefits do not count as income in California bankruptcies for purposes of the means test. Filing bankruptcy will not cause these benefits to stop. Whether you are a senior citizen or a disabled person getting Social Security Disability Insurance or Supplemental Security Income , we can help.
You may be worried about what property can be kept in bankruptcy. We will educate you about that and answer all of your other questions about the bankruptcy process.
What Can Be Done About An Unemployment Overpayment
As I said earlier, unemployment overpayments are not dischargeable in bankruptcy, and unlike most debts, they are not forgiven if you file a bankruptcy. This is true in both Chapter 7 bankruptcy, and Chapter 13 bankruptcy.
Every so often, however, the Minnesota Department of Employment and Economic Development will decide not to pursue the matter in bankruptcy court, and allow it to be discharged.
This is uncommon, and becoming even more uncommon, so you should not count on it if you file for bankruptcy.
Filing Bankruptcy Due To Unemployment Or Disability
If you are or have been unemployed, underemployed, or on disability, bankruptcy could be of significant relief to you. Bills of all types go unpaid when not enough money comes in and at some point, something must be done to help you recover.
Bankruptcy is a way for you to take care of the old bills so that you can focus on the future and provide for yourself and your household anew. Being unemployed and having employment that is inadequate can be demoralizing and lead to a feeling of hopelessness. However, bankruptcy can be a very powerful tool to help you put the past behind you and it is generally a much better idea to file a case before you become fully employed again. Frequently, people wait until they have a regular income again before considering bankruptcy and that can make getting a case approved much more difficult.
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How Chapter 13 Bankruptcy Works
If you are filing a Chapter 13 and you’re unemployed, you’ll likely have a difficult time getting your case approved . Why? Chapter 13 allows a debtor to repay creditors over time and it takes income to do so.
Here’s how it works.
In a Chapter 13 bankruptcy, a debtor pays back all or a portion of debts through a three- to five-year repayment plana benefit that isn’t available in Chapter 7 bankruptcy. For instance, a debtor can catch up on mortgage arrears, get rid of a second mortgage, cram down car loans, or pay back nondischargeable debts such as domestic support or certain taxes through the repayment plan. Because it’s set up for monthly plan payments, Chapter 13 works well for debtors with regular income.
What To Know About Bankruptcy And California Unemployment Benefits
Debt can be a crushing burden. Its cyclical nature makes it incredibly hard to escape, and interest rates cause balances to continually rise.
If you are unemployed, those problems are compounded. How is a person supposed to pay down their debt when they have no income?
Thankfully, there are processes that can help people eliminate their debt by restructuring their finances. Bankruptcy is a useful tool that many California residents can use to discharge their debts.
But what happens to your unemployment benefits if you file for bankruptcy?
Collecting Unemployment And Social Security Disability Benefits Simultaneously
Contrary to what you might think, it is possible to collect Social Security disability insurance and unemployment benefits at the same time. Of course, it is rather difficult to qualify for both of these benefits at the same time because the eligibility criteria are fundamentally at odds. To qualify for unemployment, you must be actively looking for a job. To qualify for a disability claim with SSDI, you must be permanently and totally disabled. Only a small handful of applicants can meet both of these criteria.
If you receive unemployment benefits, the Social Security Administration will take them into account when they examine your SSDI application. It is your responsibility to prove to the SSA that thereâs no conflict between the two benefits.
The same is true for Supplemental Security Income benefits, which are paid to disabled persons. While it is theoretically possible to receive this benefit alongside unemployment benefits, the criteria for the two programs are again largely at odds with each other. Unlike receiving Social Security retirement benefits and SSDI, receiving unemployment benefits may reduce your Supplemental Security Income benefit. Claimants should consult with a qualified disability attorney in either of these cases in order to ensure that they are following the rules and receiving every benefit that they qualify for.
Is Bankruptcy Right For Me
How do you know if you can file for bankruptcy with no job? In addition to your unsettled job situation, youre also facing a stressful financial situation. Life can feel overwhelming in this situation.
The important thing to remember is that you are not alone. Other people are dealing with challenges similar to your own. There is also expert guidance available to help you make your decision.
Eligibility Criteria For Social Security Benefits
If you wish to apply for Social Security benefits, youâll have to meet certain conditions. First, in order to get any kind of monthly benefit, you must have worked for at least 40 full quarters before you retire. A quarter is a three-month period during which you must have earned at least $1,470 . Once you have worked 10 years of qualifying quarters, you are eligible to apply for Social Security.
Second, you must have reached retirement age. This threshold varies depending on the year you were born. If you wait until you reach your full retirement age before collecting your Social Security benefit, youâll qualify for the full amount of the benefit. If you wish to collect your benefit early, you can apply once you turn 62, but your Social Security benefit will be reduced by 25% for the rest of your life. If you delay collecting your Social Security payments, however, delayed retirement credits could increase the benefit that youâll receive once you do start collecting.
Social Security And Bankruptcy
Another complication to filing personal bankruptcy, is that social security benefits are generally not included in the means test.
But some bankruptcy courts have held that unemployment compensation is a form of social security because under federal law unemployment compensation is funded through Social Security.
Again, like Connecticut, all states have made different decisions on this issue. Whether your jurisdiction views unemployment compensation as income or not, may make a difference in your ability to file Chapter 7 bankruptcy.
Either way, you are required to list unemployment compensation as part of your monthly income.
You may list it as a social security benefit and hope that it is excluded, but the Bankruptcy Trustee in your jurisdiction may disagree and include it.
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Other Retirement Payments Impact On Unemployment Compensation
Income that is drawn from a qualified retirement plan, annuity, or IRA can reduce your unemployment compensation in many states. If you are taking distributions from your 401 plan or receive a pension every month, this amount may be used to offset your unemployment benefits.
Youâll need to contact your stateâs unemployment office to find out what the rules are for where you live. In some states, your unemployment benefits may be reduced if you have a pension or retirement income. In other states, such as California, retirement income is exempted.
It should also be noted that IRA contributions cannot be made from unemployment benefits, because it is not considered to be earned income by the IRS.
It Can Be Harder To Qualify For Chapter 13
People often file a Chapter 13 because they earn too much to qualify for a Chapter 7 because they want to keep their vehicles, they need to catch up on recent taxes or child support, or because they want to save their home from foreclosure. Since Chapter 13 involves a 3 to a 5-year repayment plan, unemployment can disqualify someone from filing a Chapter 13 because they cant afford the monthly payments.
If you have other sources of income, such as Social Security retirement or disability benefits, unemployment benefits, workers compensation, rental or retirement income, you may have enough income to qualify for a Chapter 13. However, if you are not able to keep up with the monthly payments, your Chapter 13 case can be dismissed.
To explore your bankruptcy options and how they apply to your employment status, contact Albaugh Law Firm today!
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Going Back To Work Can Affect Social Security Benefits
If you are able to find another job and start working again after filing early for Social Security benefits, your earnings have the potential to reduce your Social Security retirement benefits until you reach full retirement age. If you earn over a certain amount each year, your retirement benefits will be reduced according to a formula found on the Social Security website. Check the website to find out exactly how much you can earn without this happening and how much your benefits will be reduced if you earn more than this amount each year. Once you have reached full retirement age, there is no earnings limit that will lead to a reduction in your benefits.
Can You File Bankruptcy If You Are Unemployed In California
If you are unemployed and are considering filing for bankruptcy in California, there are considerations that can determine if your bankruptcy filing is successful, or not. Being unemployed means your funds are limited, and filing bankruptcy seems like a sound financial move. But, because some courts may consider unemployment compensation as income, instead of being excluded as social security income it is best to obtain the services of an experienced bankruptcy attorney in LA, to determine your best course of action.
At issue is whether the court that accepts your bankruptcy filing believes that Federal mandates enacted by Congress should take the greater authority in these cases, or if they are willing to consider legislative intent and apply a case by case ruling. In either case, if you are unemployed, it is to your advantage to consult with a lawyer to discuss your options in the state of California.
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Unemployment Benefits Impact On Social Security & Vice Versa
As mentioned previously, the state of Minnesota is the only state in the union that currently offsets the unemployment benefits of those who are already receiving Social Security income. If you live in this state, your unemployment benefits may be reduced by an amount equal to half of your Social Security benefits.
But, collecting unemployment benefits never has any type of impact on the amount of Social Security you receive. If you take Social Security at age 62 and are still working, then your earned income can reduce your Social Security benefit, but because unemployment benefits are considered to be unearned income, there is no impact.
Fraudulently Obtained Unemployment Benefits Are Not Dischargeable In Bankruptcy
State unemployment benefits are paid pursuant to a system that relies on trust. Benefits are paid based on representations made by claimants that they are out of work and that they continue to seek out full-time work. If a claimant finds part-time work, then benefits are reduced accordingly.
A recent opinion from the United States Bankruptcy Court for the Western District of Michigan addresses a Chapter 7 debtors attempt to discharge a debt owed to the State of Michigan for overpaid unemployment benefits, and penalties and interest stemming from the overpayment.
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Receiving Both Unemployment Benefits And Social Security
In most states today, workers can collect unemployment insurance benefits at the same time that they are drawing Social Security. It wasn’t always this way, though. In the early 2000s, 20 states plus the District of Columbia had rules stating that if you received both benefits at the same time, then you would have to partially offset your unemployment benefits by as much as 50%. After Illinois repealed this requirement in 2015, Minnesota became the only state left with this provision.
Minnesotaâs offset law currently stipulates that only some residents must reduce their unemployment insurance benefits by up to 50% of their Social Security benefits. The key factors that determine whether this is necessary are the date that the resident began collecting Social Security and the length of time between that date and the date they began collecting unemployment benefits. The Minnesota Department of Revenue website has more information on this.
Can You File For Bankruptcy With No Job
Being in debt is bad enough, but if youve lost your job recently or accumulated debt because of unemployment, you face two battles. Dealing with bankruptcy and unemployment is overwhelming, but can you file bankruptcy with no job?
Its difficult to catch up on debt when you have a steady income. But when there is no money coming in each week or month, chipping away at a large debt is all but impossible.
Can filing for bankruptcy help you if youre in debt and unemployed?
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Always Check With Your States Unemployment Office
The rules that govern unemployment benefits vary by state, so be sure to check with your stateâs unemployment office if you have any questions. Because of the increased number of people eligible for unemployment benefits, call centers could be busy and you might find yourself on hold for a long time while trying to reach a representative by phone. You can save yourself some time by finding out if your state provides an email address or a live chat service to answer questions or by seeing if they have a list of Frequently Asked Questions on their website.
What If I Didnt Qualify For Unemployment Benefits Because Im Self
The CARES Act created Pandemic Unemployment Assistance to provide emergency unemployment assistance to the self-employed or workers whose benefits have been exhausted. Up to 39 weeks of benefits are available immediately to the self-employed, including independent contractors, freelancers, workers seeking part-time work, and workers with too short a work history to qualify for state unemployment benefits. The benefit is $600 per week, plus 50% of the average income from the previous years highest quarterly income .
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You’ll Need Some Type Of Income To Qualify For Chapter 13
You can still file for Chapter 13 bankruptcy if you’re unemployed. However, if you don’t have employment income, you’ll have to show that you have some kind of income from a verifiable source and that you can afford your plan. Otherwise, the court will dismiss your case.
For instance, an unemployed debtor might have business or rental income that can be used to fund a plan. You can even use unemployment benefits, Social Security funds, or retirement benefits. As long as you can show that you have enough income coming in from some source, then your case will likely get approved by the court.
Employment And Income In Chapter 7 Bankruptcy
Employment matters in bankruptcy cases only to the extent that your level of income matters. Whether youre fully employed, partially employed, self-employed, or unemployed is far less relevant to the outcome of your case than the amount of money you actually earn. Its also far more important in a Chapter 7 bankruptcy compared to a Chapter 13, due to the way debt forgiveness works in this case.
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Can I Discharge An Unemployment Overpayment In Bankruptcy
Your unemployment benefits might not be enough to pay for housing, insurance, groceries, and other expenses. Now, to make matters worse, youve received a letter telling you the state overpaid you and wants its money back.
The COVID-19 pandemic forced many people out of work for months, causing tremendous financial hardship. If you are in debt and considering bankruptcy, please keep reading to find out if you can discharge unemployment overpayments.
Filing For Chapter 7 Bankruptcy While Unemployed
Chapter 7 is designed to help low-income or unemployed debtors who do not have substantial assets. Under Chapter 7, your creditors will only receive repayment if you have non-exempt assets that your bankruptcy trustee can liquidate in order to pay them. Although the trustees job is to make sure creditors are repaid to the extent possible, people who file for Chapter 7 usually do not have non-exempt assets, and creditors are not repaid.
In order to file under Chapter 7, you must pass the means test. The first step of the means test is to look at whether your income is below the median, and if it is you pass the means test and do not have to take further steps. In most states, even if you receive unemployment benefits, they will not put you over the median income for your state.
Bankruptcy courts in different jurisdictions vary on whether your unemployment compensation counts as income for purposes of the means test, based on whether or not they consider it a benefit arising out of the Social Security Act. Some courts do not consider these benefits to be Social Security benefits, and in those courts, your unemployment benefits must be included in the means test calculation.
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