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“Everybody this is cleveland s disability lawyer michael einar. Back with another video from our our web series about the interplay between social security disability and other practice areas today m excited we ve got an excellent guest. We re going to be talking about the interplay between social security disability benefits and bankruptcy. Law.
And here. I ve got with me. Today. Heather moseman from the moseman law.
Firm in mentor ohio. Heather. Why don t you tell tell the viewers a little bit about yourself and your practice. Thanks.
Michael bozeman law has been in practice for 14 years. We ve been practicing bankruptcy law that entire time while bankruptcy seems very straightforward there can be lots of nuances that can help or trap. Some of our clients. So a little bit about how to avoid those traps.
Today. Yeah. I m very excited because in our office. We get a lot of questions about bankruptcy as i m sure you can imagine you know social security is a long and challenging process you know the average.
The average case takes about two years. But you know sometimes if we end up having to go to the appeals council in federal court. It can take our clients four or five years to get approved for benefits during that time their bills. You know fall by the wayside and so we re you know we get a lot of questions from clients that have you know they re thinking about filing for bankruptcy.
So i m excited to hear a little bit about things from you this morning. Let me ask you first of all when i you know there s there s different types of payments that people receive there s different types of disability benefits first question does it matter whether somebody if they re looking into filing for bankruptcy. Is receiving or applying for either ssd or ssi..
No all bank are in bankruptcy. They treat social security benefits. The same and all of them are exempt from being counted toward your criteria for filing a 7 versus. A 13 which we ll talk about in a minute and they re also exempt from your creditors and or the court taking that money and using it to pay your creditors and and you started bringing something up that s important there s different types of bankruptcy that individuals can file for yes.
That you said chapter 7. And chapter 13. Yes. Those are the two types of individual bankruptcies.
Which are most important to to our viewers today chapter 7. Bankruptcy is what we call a liquidation bankruptcy so any of your assets that are not protected by the ohio exemption laws or certain laws that say so much equity in your house. Or your car. Or your bank.
Account is exempt from being used by your creditors for anything. But let s say that you have an asset that s worth more than that that extra value can be used to pay your creditors through the bankruptcy court. So when we look at the difference between a 7 and a 13. A chapter.
13. Is more like a court ordered credit counseling program. So you you will keep your assets. You just have to pay the value of that extra into what we call the chapter 13 plan.
If you were to go chapter. 13. They re also income based. If you are at or below the median income for your family size.
It s presumed that you can file a chapter 7. All other things being equal. If you re over that it s presumed that you need to file a chapter 13..
Because you have money to pay your creditors when we are looking at social security benefits those benefits or those payments are exempt from being counted in what we call your your means test income. So you could make a little bit more with your social security benefits and if you re still working part time or if you have another pension or something like that we just have to adjust for it in your monthly expenses. So social security benefits are actually a good thing in qualifying for bankruptcy. Okay.
That s interesting. You said that does a court consider more favorably somebody you know if they re going to approve the the bankruptcy application bankruptcy filing when you say that it s favorable its favorable in the way that you would qualify for us. 7. Whereas you might not have 13 so let s say that you re getting disability benefits and they re 1200 a month.
Okay and let s say that you have a pension either from the state of ohio. Or private entity you something like that and that pension payment is let s say to 2000. A. Month so technically you re bringing in about 32 i think i said.
1200 a. Month so you re bringing in 3200. Which may push you over the income threshold for your family size if social security income was counted in your monthly income to qualify now we still have to account for it in your month income versus expenses. But whereas that income may have pushed you into a 13.
If it was other than social security income. It allows you to do a seven which can get rid of some of those medical bills. Some of the credit cards that you have to have had to live on while you re waiting for those benefits to come through it s very interesting now one thing that i know we ve talked about i ve you know learned about is the importance of not commingling funds. Yes.
And you were in in the example. You gave you were talking about you know income coming from a couple different sources. So can you talk about the yes about how to protect these um social security income. Whether it s monthly payments or a lump sum is exempt from your creditors in a bankruptcy court.
Unless that money is mingled with non exempt funds. Meaning regular payments whether it s from work. Whether it s workers comp..
Where there is some sort of personal private disability. Anything like that so let s say that you are getting again back to your. Example 1200. Excuse.
Me a month in social security and we have that two thousand dollars in pension. What you want to do is make sure that the social security is direct deposited into its own account you can then transfer that money and use it to pay your bail. So. Let s say that we have one account for social security.
And then we have the other basically your family s operating account so that 2000. Goes into the operating account your 1200 goes into the social security account as long as money. Only goes from the social security account to your family operating account. The money that s sitting here is exempt.
It s sitting here in this social security account. The minute you take money from the family operating account and put it into the social security account. Now that money is no longer exempt. And it is subject to creditors.
Okay. That s good to know especially for a lot of our clients. Where maybe you know one spouse is receiving social security and the other is working. It s good to know that those social security funds are protected and you want me interrupt.
You want to be sure that if you re getting a lump sum payment at the end of your waiting period to get your claim approved you want to make sure that that loop some goes into its own account. It s the best way to start with social security. If we are contemplating bankruptcy all that money just sits there and you could have thirty thousand dollars in that account. And you can still file bankruptcy.
And keep all that money as long as you ve never commingled. It one thing that i think people might be wondering about is the timing of things you know if somebody is applying for maybe they haven t been granted disability at or maybe. They even if they already are receiving a disability benefit is there a right time or a time..
That s too early or too late to consider filing for bankruptcy. No there because social security is an exempt to benefit you can file you can be in the middle of filing you can be at the end of filing you can start applying while you re in a thirteen. Although if you file and get benefits while you re in a thirteen that s counted as an increase in your and your plan payment may go up. But now we re getting really deep into bankruptcy.
But know you can file. Whenever you want to there is no stay. There s an automatic stay for cases. I usually suggest to my clients who are applying for social security is to wait until wait as long as you can so that if you re still getting medical bills or you re having to live off your credit cards that we can get rid of that at the end so that you we don t get rid of half of it and then you re you re stuck.
Because you can only file a chapter 7. Bankruptcy. Every eight years you can file a chapter. 13.
As often as you want to you can only get a discharge every four four years in between. But let s say that you get hurt today and you you don t have the right insurance your your whatever. It is and your family has to live off your credit cards. If we file today everything that comes after that you re stuck with for at least eight years.
Okay. I think that you ve answered the big questions that i hear regarding bankruptcy filing for my disability clients i want to thank you so much for coming and talking to me we re actually here on location today. We decided to do this in an exciting place we re actually at the us bankruptcy. Court here in cleveland in in their attorney and meeting room so i really appreciate you coming can you just tell people how can they get ahold.
If they have questions about bankruptcy. And they decide they want us to speak to a professional sure um. Our firm is called the mosman law office. We are in mentor ohio.
You can reach us by phone at four four zero two five five zero eight three two or you can reach me by email at heather at moseman law calm great thank you so much heather thank you coming today disability warriors fighting for those ” ..
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