I became unable to work last year after I was diagnosed with Stage IV breast cancer. Since I haven't been able to work for ten months, I have racked up a huge amount of credit card debt. I was in the middle of filing for Chapter 7 bankruptcy, but I just received an award letter from Social Security saying I've been approved for benefits and will be receiving a payment of $7,143 in two weeks, and regular payment of $1,135 on the second Wednesday of each month after that. If I put the check for disability back payments in my bank account, can the bankruptcy court take it? What about my ongoing payments?
You didn't say whether you'll be receiving disability benefits from the SSDI (Social Security disability insurance) program or the SSI (Supplemental Security Income) program. SSI, even lump-sum payments, can never be taken by a bankruptcy court or creditor. The rules for SSDI are a bit murkier. But I'm assuming you'll be receiving SSDI because your payment amount is more than most people receive for SSI.
Your ongoing SSDI payments shouldn't be affected by your bankruptcy. On the other hand, your lump-sum payment for backpay may not be as safe. In some states, this money is exempt from being taken in bankruptcy, while in other states only some of it may be protected from the bankruptcy trustee and your creditors. For more information, see Nolo's article Can I Keep My Disability Payments in Chapter 7 Bankruptcy?
In either case, you may want to keep your lump-sum disability benefits in a separate bank account, or at least keep good records so that you can trace the money to being from Social Security.