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Disability benefits and Chapter 13

In Florida and elsewhere across the country, some individuals who are looking to reorganize their obligations through a Chapter 13 bankruptcy may want to know if Social Security Disability benefits must be considered income that is available to repay creditors under the plan. It is a somewhat complex issue, but there are two federal laws that support excluding SSD from disposable income.

Amendments to the Social Security Act made in 1983 and the Bank Abuse Prevention and Consumer Protection Act of 2005 both state that Social Security Disability income will not be included in a petitioner’s bankruptcy estate. Rulings from some federal appellate courts that have jurisdiction over 19 states could also be cited to support arguments to exclude SSD income from a Chapter 13 plan.

As part of the initial legal process, a petitioner may find that a receiving Chapter 13 trustee will seek full disclosure of that person’s disposable income and demand that SSD income be included on a Chapter 13 filing. In response, the petitioner may be able to employ SSI laws and rulings to challenge the trustee’s request in court.

Although SSD income is not included in determining an individual’s eligibility for Chapter 7, some petitioners may still find that they have too much income to qualify, which may make Chapter 13 bankruptcy a more viable option for debt relief given their particular situation. Florida residents who have questions regarding the law or who need help assessing the pros and cons of filing a Chapter 13 petition may find that a lawyer who has experience in this practice area will be able to provide assistance.

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