Question: Will I lose my social security benefits in my Chapter 7 bankruptcy proceeding? Answer: No; except, of course, when the answer is yes.
The Social Security Act provides that no monies paid or payable under the act shall be subject to any bankruptcy law. 42 U.S.C. § 407(a). Therefore, your social security payments should be free from your bankruptcy estate under Chapter 7. But wait!
Problems can arise when you commingle your social security payments with unprotected funds. For example, lots of people deposit all of their funds initially into one account, whether it be a paycheck (which would be a part of the bankruptcy estate) or a social security payment (which would not). Under this typical scenario, which dollars on deposit in this account will the bankruptcy trustee treat as protected social security payments? Continue reading