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items purchased with SSDI exempt from creditors?


I was wondering whether items that were purchased with social security disability income are exempt from attachment and execution / sale by creditors. For example, if I bought a car with money received from SSDI, would the car be exempt from attachment and sale? Or would it mean that the money is no longer exempt because it's changed form but then you have the exemption you can use under MA law for automobiles? (I think it's $7,000). Thanks for your help.

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Submitted Mon, 09/09/2013 - 20:07

The Massachusetts state exemptions do not allow an exemption for property purchased with SSDI income just because they were purchased with SSDI income. The property would have to be exempt for another reason. You have the right idea - if SSDI was used to buy a car, equity in the car could be protected by the motor vehicle exemption.
In practice it is unusual for someone who gets SSDI to have much non-exempt property. To my knowledge, exemptions (even in other states) are rarely defined based on the source of the purchase money. Verifying the source of the purchase money would require a paper trail potentially stretching back years. Think 'the fridge I bought with my SSDI back in 1987.' Hope you kept the receipt! Better to just have an exemption for fridges.
Attorney William Parks

Submitted Fri, 04/25/2014 - 14:04

Under the US Bankruptcy Code exemptions for assets are either Federal or State exemptions. Depending on the state in which you reside will determine which exemptions the debtor filing the bankruptcy petition may use. Exemptions do not consider the source of income used to purchase the asset, only the nature of the asset is considered. It is easy to find out which exemptions are allowed within your state simply by "Googling" the name of your State and "bankruptcy exemptions allowed". With this simple search you should be able to determine which exemptions you can take advantage of in your particular jurisdiction. The exemption amounts vary from state to state and between federal and state, so prior to choosing which set of exemptions you will take advantage of, it is best to go over your entire asset list and determine which assets are most important for you to protect.
I have responded to your inquiry according to the laws of Massachusetts, where my firm is located. Laws can vary significantly from state to state and cases tend to be rather fact-specific, so you are best served by consulting with a knowledgeable attorney in weighing your options. Email messages/Online Correspondence are akin to conversations and do not reflect the level of analysis applied to formal legal opinions. Email/Online responses do not form an attorney-client relationship.
Joseph F. Botelho, Esq.

Submitted Thu, 05/15/2014 - 13:42

Bankruptcy court in the bankruptcy trustee do not take into consideration how assets are purchased or where the money came from. Only the amount of the asset is important in a bankruptcy case. You may use the automobile exemption and the catchall exemption to not have your car liquidated in your chapter 7 bankruptcy by the bankruptcy trustee. Because you paid $7000, does not mean that it's worth $7000 within the bankruptcy. This is determined usually by Kelly blue book the miles and the condition of the car. It is always important that you seek the assistance of an experienced bankruptcy lawyer before attempting to file bankruptcy, as making mistakes can cost you thousands in money and assets.

Joseph F. Botelho, Esq.

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