Disability money and Collectors

[CancerSurvivor]

undefinedWhat is the name of your state?Kansas

I will getting a lump sum of money for backpay on a Disability case. I lost my job due to the disability and have a HUGE amount of medical bills alomg with substantial credit card and other debt. I plan on filing bankruptcy. Can the money I get be garnished for past due bills? I had been fighting Disability for a year and will be getting money soon.
What should my first step be? Pay off the car, or put it in the bank or just keep it under the mattress so there is no record of it in my bank. Not trying to dodge my debt, but I have over $100,000 in medical bills (cancer) and there is no way we can pay that with my wife only working and feeding a family of 5 on 1600 per month.

 

[Ladynred]

Disability money is exempt from garnishment, creditors cannot touch it.

I wouldn't jump to pay off the car just yet. If the resultant equity in the car is more than your allowed exemption in bankruptcy, you could lose the car to the Trustee.

 

[CancerSurvivor]

could you explain that to me in lay terms? I 'm not familiar at all with how disability, bankruptcy or collections work .

 

[Ladynred]

Ok. Disability cannot be touched. They cannot take any part of it from you if they sue you and win a judgment. It is EXEMPT from siezure.

In a Chapter 7 bankruptcy, when you file, everything you own becomes your bankruptcy 'estate' that is ultimately controlled by the Bankruptcy Trustee. The Trustee then has the power to sell off your property to pay off your creditors. BUT, the state and federal laws allows you to keep a certain portion of your personal property so that you can meet basic needs for living. Bankrutpcy's purpose is not to put you on the street or leave you sitting on milk crates. What you can keep is called EXEMPT PROPERTY and there are dollar limits for each category of asset. If your assets exceed the exemption limits, the Trustee can take that property and sell it. This includes cash in the bank, but since your disability is exempt per state and federal law, the Trustee can't take that either.

The exemption for your car is applied to the EQUITY that you have in it. If you owe 10K and its worth 15K, you would have 5K in equity and the Trustee in most states would be looking to take your car. If you owe 10K and the car is only worth 5K, then you're 'upside down' on it and you have NO equity, so the car would be safe.

So, if you pay off your car, that would give you 100% equity. If the VALUE of the car is more than the allowed exemption limit, then you could lose the car or end up having to pay the Trustee to keep it.

Most people who file lose nothing at all of their personal property.

 

[CancerSurvivor]

so if I file can I let the Bank know that I am not including the car in the BK procedings? I can continue to pay as normal without issue? You can leave out certain debt correct?

 

[ihatearizona]

You cannot leave out ANY debt when filing for BK. You will have to list everything. If you wish to keep your vehicle you will need to enter into a reaffirmation agreement with the lender in order to keep the vehicle.

I found this on a KS attorney's web site:

In a Chapter 7 case, debtors may want to "reaffirm" certain debts. To reaffirm a debt normally means that the debtor intends to pay a specific debt back to a creditor under the terms of the original agreement. This is typically done on secured debts such as home mortgages and automobile loans where the debtor wants to retain that piece of secured property. These debts are normally not modified and reaffirmation of the debt will cause the debt to survive bankruptcy and the reaffirmed debt will not be discharged upon the completion of the Chapter 7 case. A debtor is not required to reaffirm any debt in the bankruptcy, however, if the debtor does not reaffirm a debt secured by a piece of property, the property securing the debt must be surrendered to the creditor pursuant to the security agreement with the creditor.