If you are receiving disability income, regardless of
whether the income is from private insurance or social security, Florida has a
statute that keeps this income safe from creditors. This means that most creditors cannot garnish
your disability wages because there IS
an exception—the IRS. If you owe
back taxes, the IRS can indeed garnish your disability wages, within
reason. However, other than the IRS,
creditors cannot garnish your disability wages attempting to recoup money you
owe them.
Because of this statute, many people think that their
disability income will not be a factor when filing for bankruptcy. After all, if the wages can’t be touched by
creditors, the bankruptcy court must ignore them, right?
Unfortunately, it’s a little more complicated than
that. If you receive disability income
and you decide to file for bankruptcy, that disability income will be
considered when your bankruptcy attorney conducts a means test analysis. If your disability income is significant
because of private disability insurance, your attorney might suggest that you
avoid filing bankruptcy and pay back your debts with the disability income you
receive.
“But wait, I thought
disability proceeds were exempt!”
This is where many people become confused regarding the bankruptcy
code in Florida. Yes, disability
proceeds are exempt from judgments against you but the court will still
consider disability proceeds for the purposes of the means test analysis. For example, if you were a highly-paid
executive who receives $25,000 per month in disability insurance from a private
disability policy, the court will likely look at this as significant income to
repay your debts rather than granting you discharge of them in bankruptcy.
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