How Your Debts May Affect Your Social Security Disability Award

 Posted on October 22, 2018 in Social Security Disability

Many Illinois residents are understandably reluctant to hire an attorney to represent them when applying for Social Security disability benefits, because they simply cannot afford to pay a lawyer–especially when they are already unable to work and have limited financial resources. This is why a qualified disability lawyer works on a contingency basis. In other words, the lawyer only accepts payment if they obtain a disability award for the client.

Federal law also requires Social Security to pay applicants’ attorney’s fees in certain cases. Specifically, the Equal Access to Justice Act (EAJA) provides that when an applicant prevails in litigation against the Social Security Administration–and the government's position was not “substantially justified”–then a judge may order an award of attorney's fees to the successful applicant. However, an EAJA award is payable directly to the disability applicant rather than his or her attorney.

Seventh Circuit Upholds Using Attorney Fee Award to "Offset” Poor Disability Recipients' Debts

The distinction of whom the award is paid to is critical, because there are cases where the federal government can use money awarded for attorney’s fees to “offset” debts owed by the applicant for matters unrelated to their Social Security case. For example, if an applicant is behind on their student loans or child support payments, the U.S. Treasury can use a disability-related award of attorney’s fees to pay off those debts without the applicant’s consent.

The U.S. Seventh Circuit Court of Appeals here in Chicago recently addressed a pair of cases involving the use of such offsets. Both cases originated in Indiana. In each case, the plaintiff applied for Social Security disability benefits, and Social Security denied the application. The plaintiffs sued Social Security in court and won an award of disability benefits plus attorney’s fees under the EAJA.

The attorney fee awards were about $11,000 in each case. However, the U.S. Treasury used the entire amounts from each award to offset the plaintiffs’ respective debts. The plaintiffs then asked the courts to reverse the Treasury's decision, arguing they had previously “assigned” their award of EAJA fees to their disability attorneys, and under Indiana law, this assignment took priority over other debts.

The Seventh Circuit declined to intervene. It held that the federal courts did their duty under the EAJA by awarding the attorney’s fees. The Court said it could not consider “free-standing challenges to the actions of an agency that is not a party” to the disability litigation, namely the U.S. Treasury. Instead, the Seventh Circuit invited the attorneys who were deprived of compensation to file a separate lawsuit against the Treasury over its offset rules.

Speak With a Chicago Disability Benefits Lawyer Today

In its opinion, the Seventh Circuit said it sympathized with poorer disability applicants who were placed at a greater disadvantage by the Treasury's offset rules. Nevertheless, that is how the law currently stands.

You should not let outstanding debts keep you from pursuing your own disability claim. If you need advice or assistance from an experienced Chicago Social Security Disability lawyer, contact Pearson Disability Law, LLC at 312-999-0999 to schedule a free consultation and learn more about your options.

Sources:

https://scholar.google.com/scholar_case?case=13101654570358182306