In my last blog, I brought out that Federal law makes Social Security benefits exempt from creditors’ claims, including retirement benefits and disability benefits from Social Security, and about the fact that, with the exception of the IRS, even creditors who have legal judgments against a debtor cannot intercept Social Security payments or take that money from  after it’s been paid to a recipient.

Well, by coincidence, right after I had posted that blog, neighbors who receive the AARP bulletin brought over an article they had saved for me from the October issue called “When Creditors Seize Social Security Payments“.  The article told the story of a Brooklyn, New York gentleman whose creditors had a court order to seize funds from his account.  This action caused the bank to freeze his account for three weeks.  Now, as mentioned above, freezing or garnishing accounts that hold Social Security, SSI, or veterans’ benefits is illegal, but, since this man’s benefit checks were being deposited electronically into his account along with other money, the bank was obligated to comply with state laws about garnishment or risk paying big fines. AARP has filed court briefs to stop bank garnishments of Social Security funds, urging federal regulators to take steps to protect Social Security recipients.

Social Security disability payments present yet another sort of problem relative to my practice of bankruptcy law. As the Indianapolis Star reported last summer, “Getting On Disability Is A Real Pain”. Statistics quoted in that article included 141,510 people in Indiana who have Social Security disability, with 12,094 cases pending at that time.  The average time for a judge in Indiana to hear a Social Security disability appeal is 749 days, almost two full years!

Think about what that means. Without a job, some applicants can lose their homes or their cars, and some end up going on welfare.  Quite a number end up filing bankruptcy. In the bankruptcy process, If it is expected that the debtor will in fact qualify for social security disability, that anticipated income will have to be taken into consideration when the judge is assessing the all the reports on income, assets, and debt.  So, while the Social Security benefits themselves are off-limits to creditors, those benefits are very much a part of the picture when a debtor files bankruptcy.