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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 174
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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In Texas, my grandmother passed away and was receiving Social

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In Texas, my grandmother passed away and was receiving Social Security payments. After her death the Social Security Administration (SSA) continued to send monthly direct deposits into an account that my grandmother and mother held as a joint account. These payments continued for over a year. The funds were ultimately used by my mother and are not available to be returned to the SSA. Additionally, my mother cannot meet her other debts (credit cards, mortgage, medical bills, etc) with her current income and plans to file bankruptcy under either Ch 7 or Ch 13. Will a bankruptcy shield my mother from the SSA's attempt to recover the funds it paid after my grandmother's death? Are they treated as any other creditor or do they receive an elevated status?
I am a bankruptcy attorney and I would be happy to assist you. Whether your mother chooses to file Chapter 13 or Chapter 7, she will be required to repay the Social Security Administration for the funds. This is because debts acquired by false pretenses or other fraudulent means can’t be discharged in bankruptcy. The Social Security Administration has a right to object to a bankruptcy discharge and will do so if they believe she accepted the payments knowing that she was not entitled to them.

In Chapter 13, the funds will be figured into the Chapter 13 repayment plan. Therefore, the payments made will be made to the Chapter 13 trustee spread over the 3 or 5 year plan. The trustee will then disburse the funds to the social security administration on her behalf. In a Chapter 7, the funds will be listed but they will not be discharged. Therefore, after the Chapter 7 bankruptcy closes she would then be able to work out a repayment plan on her own with the Social Security Administration.

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Customer: replied 3 years ago.

My understanding (possibly incorrect) of a Ch 13 repayment plan, is that after whatever allowable exemptions there may be for her assets (which i believe her only assets would be exempt), if a persons income is not sufficient to cover a certain predetermined level of expenses, then there is no additional amount that would go to repay her creditors. Assuming that is correct, would the amount owed to the SSA just not be part of the repayment plan or how would that work?

A Chapter 13 repayment plan is complicated and determined by a variety of factors. First the monthly payment is determined by Schedule 22C, wherein her disposable monthly income is determined by various standards set by the government and secured creditors she owes. This payment then is split over 3 or 5 years. The payments will include the trustee fees, the bankruptcy attorney fees, non-dischargeable debt (education debt, taxes, the social security administration debt, etc.), secured creditors (if the trustee requires them to paid inside the plan). Anything owed beyond the required debts to be paid back in the plan will go to the unsecured creditors (example - credit cards).


If she has non-exempt assets (for example - a boat that is paid in full which not exempt), then she has to pay back the unsecured creditors at least as much as the non-exempt portion of her assets. That would increase her plan payments. However, most Chapter 13 plan payments do not require any unsecured creditors to be repaid. If a person does not have enough income to make the minimum monthly required trustee payments determined on Schedule 22C or as determined within the Plan, then they should not be filing Chapter 13. They would then file Chapter 7.


I hope my answer has assisted you and that you will leave me a positive rating! Please feel free to ask for me by name if you have any questions in the future.

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