Tag: Social Security

Bankr. W.D.N.C.: In re Mergentime- Transferred Social Security Benefits


Ms. Mergentime received $62,417.80 as a lump sum payment for retroactive Social Security benefits, approximately 4 months after filing her Chapter 7 bankruptcy. She had not disclosed those potential funds in her petition. Pursuant to her equitable distribution agreement, she paid half of those funds to her ex-husband. The Trustee sought to recovery those transferred funds and to deny Ms. Mergentime’s discharge, arguing that even though those funds would have been fully protected, the transfer to her ex-husband changed the nature of those funds such that they were no longer protected.

The bankruptcy court rejected this argument as the Social Security benefits were not, pursuant to 42 U.S.C.… Read More

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Law Review: Twomey, Tara & Maynes, Todd- Protecting Nest Eggs and Other Retirement Benefits in Bankruptcy

For debtors facing financial distress in the twilight of their working years or beyond, bankruptcy’s promised fresh start may depend more on preserving retirement assets and benefits than returning to economic productivity. Even for those in the prime of their working years, losing retirement assets can represent a major lifelong setback. As a result, the question of whether consumer debtors can keep all or part of their retirement assets and benefits is a critical consideration. This paper surveys the intersection between the Bankruptcy Code and the preservation of retirement assets and benefits before and after the 2005 amendments to the Code.… Read More

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31 C.F.R. § 212 – Garnishment of Accounts Containing Federal Benefits: Commingled Funds Still Exempt


Effective February 23, 2011, federal regulations may have settled the question about whether federal benefits, including Social Security and VA benefits, that are exempt from garnishment or execution by judgment creditors and bankruptcy trustees retain that exempt status if commingled with other non-exempt funds. 31 C.F.R. § 212.3 applies to garnishment, which is defined to include “execution, levy, attachment, garnishment or other legal process” (Emphasis added), which should include actions by a bankruptcy trustee. Under this regulation, the burden of determining if a bank account is subject to garnishment falls on the financial institution holding the bank account. It must determine how much of any federal benefits in the account constitute a “protected amount”, defined as the lesser of the sum of all benefit payments posted to an account during the preceding two months, or the balance in an account when the account review is performed.… Read More

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Bankr. E.D.N.C.: In re Goodman- Setoff of Social Security Funds


In December 2010, the Social Security Administration the Debtor of an alleged overpayment of SSI benefits, seeking repayment of $11,585. In March 2011, the Debtor received a “Notice of Award” for Social Security Disability (“SSD”) benefits of $1,001.00 beginning March 2011. Also in March 2011, the Debtor was notified of SSA’s decision that she was entitled to receive a monthly payment of $674.00 and retroactive SSI benefits from May 2010 through March 2011 totaling $7,414.00. Then on March 24, 2011, SSA intercepted the debtor’s $7,414.00 in retroactive SSI benefits, which it applied toward the $11,585.00 overpayment. The Debtor filed bankruptcy on April 7, 2011, and subsequently sought turnover of the $7,414.00 seized within 90 days of the filing of her petition.… Read More

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