The Bankruptcy Reform Act of 1978 (BRA) created a new class of bankruptcy (Chapter 13) for debtors with regular income (including Social Security benefits). One provision of the BRA allows bankruptcy courts to have debtors' income managed by court appointed bankruptcy trustees. To effectuate that provision, some bankruptcy courts issue orders to SSA to pay beneficiary/ debtor's benefits directly to a trustee.

The BRA does not contain an express exception to section 207 of the Act; therefore, bankruptcy court orders for the payment of benefits to bankruptcy trustees cannot be honored.

If any SSA office is served with a court order directing SSA to pay all or part of a benefit to a bankruptcy trustee, immediately forward the order and a current MBR/SSR to the ARC, Programs in the region responsible for the State in which the issuing court is located. The ARC, Programs will:

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  Forward the order to the Office of the General Counsel (OGC) by email for preparation of a response to the court; and

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  Store the order to the Non-Disability repository for Evidentiary Documents (NDRed) using the Evidence Portal (EP), see MS 09701.001.

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  If there is an electronic folder (EF), fax the order into the EF, see DI 81010.090.

See GN 02215.185-GN 02215.230 regarding preventing an overpayment from being discharged if a bankruptcy court order refers to a beneficiary who is also overpaid (i.e., SSA could be a creditor in the bankruptcy proceeding).