Chapter 7 and Social Security Benefits

If you’re receiving disability benefits, they may be considered an asset in bankruptcy, but are typically protected by both state and federal exemptions during Chapter 7 bankruptcy:Social Security Disability Insurance (SSDI) – SSDI benefits are usually protected due to a debtor’s need for these benefits to provide support while they cannot work. If you’ve received a lump sum payment for past benefits, you will simply need to prove that it was initially an SSDI payment. Also, some jurisdictions allow a Chapter 7 trustee to take a portion of this lump sum payment, so speak with an experienced bankruptcy attorney to understand how your SSDI benefits may be affected by Chapter 7.Supplemental Security Income (SSI) – Like SSDI benefits, SSI benefits are typically exempt in Chapter 7 bankruptcy under federal law.Other benefits – Other disability benefits received via private, state, or other programs may not have the same protections as Social Security benefits, as each state maintains its own exemption system. Illinois does offer additional protections for private/state disability benefits, though these can vary depending on the jurisdiction and benefits in question, so consult with an experienced bankruptcy attorney for more information.