Bankruptcy and SSDI Fraud
Filing for bankruptcy can be a stressful process, and some individuals may feel tempted to withhold certain assets, including Social Security Disability Insurance (SSDI) benefits, to protect their financial situation. However, hiding SSDI benefits during bankruptcy can lead to severe legal consequences, including fraud charges. Courts in Arkansas, Oklahoma, Mississippi, Tennessee, Texas, and Louisiana take bankruptcy fraud seriously, and failing to disclose income—including SSDI—can result in criminal penalties. The American Disability Action Group is here to help.
Are SSDI Benefits Protected in Bankruptcy?
One of the most common misconceptions about bankruptcy is that all income must be surrendered to creditors. However, SSDI benefits are generally exempt from bankruptcy proceedings, meaning they are protected from being seized to pay off debts. Because of this exemption, there is often no reason to hide SSDI benefits, yet some filers mistakenly believe that disclosing these funds will work against them.
Federal law under the Bankruptcy Code (11 U.S.C. § 522) allows individuals to exclude SSDI benefits from the assets that creditors can access. However, full disclosure is still required when filing bankruptcy, and failing to report SSDI payments can lead to allegations of fraud.
What Happens If You Hide SSDI Benefits in Bankruptcy?
Arkansas
Arkansas bankruptcy courts require filers to disclose all sources of income, including SSDI. If SSDI benefits are intentionally hidden, it may lead to a denial of debt discharge or criminal charges. Courts may also impose financial penalties and require repayment of any discharged debts.
Oklahoma
In Oklahoma, concealing SSDI income in bankruptcy proceedings is considered perjury and fraud, which can result in fines, imprisonment, and loss of bankruptcy protection. The court may also reopen the case if fraud is discovered after discharge.
Mississippi
Mississippi bankruptcy courts take fraud seriously, and if SSDI benefits are omitted from filings, the debtor may face an investigation by the U.S. Trustee’s Office. This could lead to felony charges, fines, and even revocation of Social Security benefits in severe cases.
Tennessee
Tennessee law requires full transparency in bankruptcy cases. Hiding SSDI payments could lead to dismissal of the bankruptcy case and prevent the filer from seeking bankruptcy relief in the future. In some cases, criminal charges may be filed for fraudulent misrepresentation.
Texas
Texas bankruptcy laws protect SSDI benefits from creditors, but failure to disclose them is still illegal. Those caught hiding disability income may be charged with bankruptcy fraud, a federal offense that carries potential prison time and hefty fines.
Louisiana
Louisiana courts consider intentional non-disclosure of SSDI benefits as fraudulent concealment. If discovered, debtors may face loss of bankruptcy protection, restitution orders, and federal prosecution under U.S. bankruptcy laws.
Penalties for SSDI Fraud in Bankruptcy
Federal bankruptcy fraud charges can result in:
- Fines up to $250,000
- Prison sentences of up to five years
- Revocation of bankruptcy discharge
- Loss of Social Security benefits in extreme cases
In addition, individuals caught hiding SSDI benefits may be banned from filing bankruptcy in the future or have their cases dismissed without the opportunity to discharge their debts.
How to Properly Report SSDI Benefits in Bankruptcy
To avoid legal trouble, always disclose SSDI benefits fully and accurately when filing for bankruptcy. Work with a qualified bankruptcy attorney to ensure that your case is handled correctly and that your SSDI benefits remain protected.
If you are considering bankruptcy and are unsure how your SSDI benefits will be affected, American Disability Action Group can help. Our attorneys assists individuals in Arkansas, Oklahoma, Mississippi, Tennessee, Texas, and Louisiana with navigating disability benefits and legal compliance. Contact us today for guidance on protecting your rights while avoiding legal risks.
Source:
law.cornell.edu/uscode/text/11