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Bankruptcy for the Disabled


While unexpected circumstances and scenarios often cause American debtors to consider the bankruptcy option, a disability, often combining mounting medical costs with a sudden loss of an otherwise dependable income, can make for an especially strong case for seeking the benefits of bankruptcy. The good news is a personal bankruptcy is an often safe solution for eliminating some (or all) of the associated debts from a disability. Unlike the process for qualifying for federal disability benefits, no medical criteria are necessary for a disabled person to seek the safe havens of a personal bankruptcy filing.

In terms of eliminating debt for your disability under the former, Chapter 7 bankruptcy, it is important to understand that this type of “liquidation” bankruptcy is designed for debtors with limited assets who are looking to discharge some or all of their unsecured debts. These debts can include medical costs, credit card debt, payday loans, and even utility bills. Like everyone else, in order to benefit from Chapter 7 you must pass bankruptcy’s “means test,” a preliminary evaluation of your income or related benefits that ultimately determines your eligibility for this debt dissolution process.

If, for whatever reason, you are not eligible for Chapter 7 or are attempting to hold onto valued possessions throughout the bankruptcy process, Chapter 13 bankruptcy is another viable option. Chapter 13 allows you to reorganize and dispense with debts through a three to five year debt repayment plan. Unlike Chapter 7, however, Chapter 13 requires that debtors—even disabled debtors—have a relatively stable source of income, either through wages or government benefits. This steady income provides assurances that you will be able to make regular payments on their restructured debt plan. At the completion of their debt payment plan, Chapter 13 debtors can hold onto homes and cars, even as they catch up on debts from mortgage delinquencies and default auto loans.

No matter which bankruptcy you choose, often the most common question that disabled debtors have is whether a personal bankruptcy filing will affect their ability to receive disability benefits. While there is no catchall answer for all states, nor all applicants, it is important to understand some basic premises, especially as it relates to Chapter 7, the most common personal bankruptcy option.

Fortunately, most states recognize disability payments as exempt from this process, and, in turn, the clutches of creditors clamoring for a payout. As a result, in many cases, disabled debtors can keep their disability income as they dispense with mountains of debt, even if creditors are able to access other valuable assets or forms of income.

As a result of the nuances and intricacies of bankruptcy law as it relates to disability benefits in your state, if you find yourself facing insurmountable debt from a disability, it is essential to begin the bankruptcy process with assistance. An experienced bankruptcy attorney knows the ins and outs of the bankruptcy process and can assist throughout your case, no matter who your creditors are. Contact the Law Offices of John T. Orcutt in North Carolina TODAY for a totally FREE debt consultation. Just call toll free to +1-919-646-2654, or make your appointment online at Simply click on the yellow “FREE Consultation Now” button.

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