Any money you’re owed is an asset of your bankruptcy estate and has to be listed on your bankruptcy forms. Whether you can protect the money you’re owed, depends on two things:
- Is a wildcard exemption available to you? If so, and there is no limitation to exclude this type of asset, you can protect the money you are owed up to the available exemption amount.
- Is there a specific exemption you can use to protect the money you’re owed?
Some common exemptions for “funds owed” are:
Earned But Not Yet Received Wages: Most states have some type of exemption available to protect earned but not yet received wages. If you are a 1099 employee or self-employed, these exemptions may not apply to you.
Tax refunds & tax credits: Some states provide exemptions for tax refunds, some states provide exemptions for tax credits, and some states don’t provide any kind of exemption.
Disability, social security and other public assistance benefits: Most of these benefits are 100% protected by an exemption, including funds you’re owed but have not yet received. For example, if you recently applied for social security and you’re owed a lump sum in back pay, the money you’re owed from social security is protected.
IMPORTANT: You have to list the asset on your Schedule A/B for exemptions to protect the money you’re owed. If you don’t list the asset, you can’t protect it, even if an exemption would otherwise be available.
For more, check out this article in our Learning Center: Can the trustee seize money that I received after I filed?
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