Benefit Payments and Bankruptcy

Certain benefit payments cannot be taken from you to pay a routine debt.  These benefits are called ‘exempt.’  You cannot be forced in a bankruptcy to use them to pay debts.  These exempt funds include but are not limited to: social security; worker’s compensation; unemployment compensation, cash assistance payments under Ohio Works First (OWF); disability assistance (DFA) administered by the Ohio Department of Job and Family Services; Supplemental Security Income (SSI); veterans benefits; black lung benefits and certain pensions.

If you receive one or more benefit payments listed above, your creditors may not be able to do anything bad to you that a bankruptcy will prevent.  Certain benefit payments cannot be garnished by creditors.

Your benefit payments are also exempt if placed in a bank account.  However if your account is attached by a creditor, you must request a hearing to prove the exemption.  Until then, it can be inconvenient since the attachment freezes your account until the court releases it.  This can result in bounced checks and cause embarrassment.  To try to prevent an attachment of a bank account, you should write to any collection attorneys who have judgments against you to show that benefit payments is your only source of funds.  There is one exception: do not deposit money in a bank that you owe money to directly or through an affiliated credit card.  That bank will be able to set off your debt with your funds even if they are exempt.

Being in debt beyond your ability to pay is a great source of anxiety and can lead to unpleasant contacts with bill collectors and courts. However your creditors may be able to do less financial harm to you than you think.

For more information see CLAS' other fact sheets:

Exempt Property Under Ohio Law
Bank Account Attachment in Ohio
Avoiding Bank Account Attachment
In Debt and Bankruptcy Is Not an Option
Your Right to Fair Debt Collection


This article is meant to give you general information and not to give you specific legal advice.
Prepared by: Community Legal Aid Services, Inc. Info Updated February 2012. CE-01-F006-CLAS