Social Security Benefits Protected In Bankruptcy

Photo (cc) by bloomsberries

Should your creditors be able to seize your Social Security payments to satisfy debts in a chapter 13 bankruptcy?

The National Association of Consumer Bankruptcy Attorneys says no, and an appeals court recently agreed. From their press release:

In re Welsh, the Ninth Circuit Court of Appeals shielded Social Security benefits from creditors. NACBA, represented by the National Consumer Bankruptcy Rights Center, had filed an amicus curiae brief asking the court to honor the clear directive of Congress that these benefits, vital to so many elderly and disabled individuals, be protected from creditors and chapter 13 trustees eager to squeeze every last cent out of debtors who have suffered financial hardships.

NACBA President Ed Boltz said: “We are gratified that the court recognized that Congress wanted to protect these benefits from creditors, as it has done historically since the Social Security Act was passed.”

The case in question involved a 2010 Chapter 13 bankruptcy filing. Montana residents David and Sharon Welsh owed more on their home, trailer, two ATVs, and two of their three cars than those things were worth. They also owed over $180,000 on other things, including about $60,000 from a daughter’s student loans and$50,000 on a Bank of America line-of-credit.

Dave was retired and drawing Social Security, while Sharon was a nurse making about $7,000 a month. Based on that income, they planned to repay $125 a month on the unsecured debts (the $180,000 of “other things”) for the first two-and-a-half years and then $500 a month after paying off the vehicles.

The creditors’ representative argued that wasn’t good enough, saying they were making tiny payments that didn’t include the Social Security income, “while they were living in a $400,000 home, making payments on various luxury and unnecessary items and failing to commit one hundred percent of their disposable income to the plan.”

Whatever you might think of their spending habits, the court has repeatedly sided with the Welshes and NACBA, and just did again. You can dig into the details of the ruling here. [PDF]

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
The 10 Best and 10 Worst States for Raising a Family in 2020
The 10 Best and 10 Worst States for Raising a Family in 2020

There are trade-offs no matter where you live. However, some states have big advantages when it comes to choosing a home for your family.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

8 Amazon Picks Under $30 for Coffee Lovers
8 Amazon Picks Under $30 for Coffee Lovers

We’ve brewed up a list of amazing Amazon products that are sure to perk you up.

16 Affordable Products That Could Save Your Life
16 Affordable Products That Could Save Your Life

You’ll want to order these sometimes surprising products from Amazon ASAP.

7 Mistakes Guaranteed to Ruin Your Retirement
7 Mistakes Guaranteed to Ruin Your Retirement

Make even one of these money mistakes, and you’ll probably end up eating ramen noodles in your golden years.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.