Social Security, Unemployment, Worker's Compensation and Bankruptcy

There are 2 types of questions that people receiving benefits ask

  • Can I file Bankruptcy, either Chapter 7 or Chapter 13?
  • Should I file a Bankruptcy?

As to the first question, receiving benefits such as Social Security, Unemployment, or Worker’s Compensation the answer is ”YES.” Receiving benefits is not a deterrent to filing a case.

Should you? That is more of an individual decision.

First, you should know: private creditors cannot garnishment social security benefits. Neither can they garnishment Unemployment benefits or your Worker’s Compensation payments.

Also, if you have modest amounts in a bank your money is safe.

Based on experience here are some reasons folks have filed

  • Clients are just tired of being harassed by creditors;
  • Some others believe that after they file Chapter 7 they can rebuild their credit (and they are correct);
  • Some people receiving benefits might be able to finance a purchase of a car after filing Chapter 7;
  • Their short term situation might be the ideal time to file Chapter 7 or Chapter 13.

Let me explain why this could be the best time to file a case.

You had a very good job with a good income and you expect to start working again in a short while.


The single client had been making over $100,000 per year. Her employer closed shop. The client fully expects to get a new job in a few months.

One gentleman told me his employer cut his income in half. He fully expects to go back to his prior income in a few months.

The same is true if one needs file Chapter 13. With current income, Chapter 13 monthly payments will likely be lower than when full time employed.

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