Things to Know About Social Security and Bankruptcy in Arkansas

Social Security and bankruptcy have a straightforward relationship, but there are essential things to know about how income affects the process in Arkansas. You should get to keep your benefits, but filers should undoubtedly understand at least the basics before moving forward with their potential case.

Social Security and bankruptcy share a reasonably straightforward relationship, but making it fluid and streamlined requires some understanding of the monies that are exempt and nonexempt from bankruptcy proceedings. Arkansas residents considering bankruptcy should take special care and pay extra attention to some of the more common issues that arise.

Listing Social Security in Your Arkansas Bankruptcy Filing

Every type of individual bankruptcy, including Chapters 7 and 13, requires listing all of your own property. Once you receive Social Security funds, the money’s status changes from income to property, and you have to list it in your schedules.

In any case, federal law notes that Social Security funds are exempt property, meaning that you’ll get to keep it, regardless of which other property has been deemed yours or the courts.

How to Avoid ‘Commingling’ in a Bankruptcy Proceeding

It is absolutely vital to keep records of the Arkansas and federal Social Security benefits you’ve received each month. If you’re considering bankruptcy, a separate account for those benefits could help alleviate any concerns of “commingling,” in which benefits end up being seen as combined with other funds (as all into one bank account). If exempt Social Security funds are combined or commingled with nonexempt funds in a single bank account, the exempt Social Security funds could lose their protection.

The Wildcard Exemption

Arkansas does have a minor wildcard exemption. The exemption allows filers to exempt property that isn’t exempted by any other legal provision. A single filer in Arkansas is permitted to exempt an additional $200 in property value. Married couples filing jointly and single individuals classified as “head of household” may claim this up to $500. For those filers making use of the federal exemptions, a wildcard exemption of between $1,325 and $13,900 for individuals and between $2,650 and $27,800 for jointly filing married couples can be used to protect personal property, depending on the filer’s circumstances.

This offers a small but additional lifeline for those with lower income when considering the total value of their available assets in addition to monthly Social Security benefits.

Lastly, you’re not required to include Social Security benefits in the Chapter 7 Bankruptcy Means Test.


At Natural State Law, we take pride in understanding the ins and outs of your specific bankruptcy case and helping you through the process. It can be overwhelming, but we’re here to help. Call us today at (501) 916-2878 to speak with a knowledgeable personal bankruptcy attorney and learn how we’ve helped Little Rock residents start over financially.