Bankruptcy While Applying for Disability

A client who is in the Application-Denial-Appeal cycle of disability benefits will often experience severe financial difficulties before they obtain their award. Contrary to some popular misconceptions, bankruptcy laws can actually help preserve a client’s resources and assets. Bankruptcy while applying for disability is possible.

  1. Missed house payments can be paid over 36 to 60 months without additional interest in a Chapter 13 bankruptcy. A client who can pay their regular house payment and the arrearage payment will be able to keep their home. During this time, bankruptcy while applying for disability may be right for you.
  2. A car loan that would be paid off during a Chapter 13 Plan can be spread out with lower payments over the whole 36 to 60 months of the plan. During this time, bankruptcy while applying for disability may be right for you.
  3. A client who has lost their driver’s license due to non-payment of fines will get the license back if the fines are included in a Chapter 13 Plan.
  4. During this time, bankruptcy during disability application may be right for you.
  5. Store credit card balances secured by purchases such as Sears or Les Schwab may be reaffirmed at a lower balance and payment based on the current value of the products purchased on credit. During this time, bankruptcy while applying for disability may be right for you.
  6. Again, contrary to conventional wisdom, student loans may be partially or fully discharged in bankruptcy. In order to do so, “a debtor must establish (1) that he cannot maintain a minimal standard of living for himself and his dependents, based on his current income and expenses, if he is required to repay the student loans; (2) that additional circumstances (disability) indicate that his inability to do so is likely to exist for a significant portion of the repayment period of the student loans; and (3) that he has made good faith efforts to repay the loans.” Judge Corbett in the Eastern District of Washington requires debtors and student loan lenders to attend a mediation to resolve the matter based on these factors.

Filing for bankruptcy while applying for disability may be the right choice for you.