Under IL law are SSDI lump sum back pay funds exempt in a Ch 7 bankruptcy?As funds have already been spent

Asked over 3 years ago - Belleville, IL

IL laws regarding SSDI lump sums and Ch7 bankruptcy

Attorney answers (4)

  1. Scott David Rogoff

    Contributor Level 9

    Answered . Generally, those proceeds are exempt. Once they are in your account, they may not be. If you spent the proceeds on everyday normal living expenses, and did not pay them to a creditor, you will probably be fine as long as you can prove that you spent those proceeds on normal everyday living expenses. If you paid a creditor, then it is a preference to that creditor and the Trustee is entitled to disgorge that money from the creditor and disburse it amongst all creditors.

  2. Kathryn L. Harry

    Contributor Level 9

    Answered . Typically, SSDI funds are exempt from creditors. However, if the funds are already spent, there is nothing to claim as exempt on your bankruptcy petition.

    The use of the Internet or this forum for communication with the firm or any individual member of the firm does... more
  3. Theodore Lyons Araujo

    Pro

    Contributor Level 20

    Answered . If the funds wwere already spent there is no exemption because the property no longer exists. Generally money from SS is exempt.

    The chapter 7 Trustee may be able to go after the creditor to hom you paid the money however.

    Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and... more
  4. Mitchell Paul Goldstein

    Contributor Level 20

    Answered . SSDI and its proceeds are protected from creditors, even lump sum payments. Once you pay it to someone, it may not be especially if that payment is considered a preference.

    Mr. Goldstein is a Virginia-licensed attorney only. The information is not, nor is it intended to be, legal advice.... more

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