Are SSI Benefits Affected by a Car Accident Settlement?

A personal injury settlement can help offset some of the expenses after you are injured or disabled in a car accident. However, a settlement could jeopardize your benefits if you already receive supplemental security income (SSI). Without proper planning, the car accident settlement meant to alleviate your financial burdens can create more problems by making you ineligible for your SSI benefits. Let the experienced Michigan auto lawyers at Matz Injury Law guide you through the steps after settlement to help protect your benefits and financial security.

What Happens If I Don’t Report My Michigan Settlement to Social Security?

While you may be tempted not to report the settlement to the Social Security Administration or become so busy with your personal affairs that time slips away from you, you should understand how important it is to do so in a timely manner. Choosing not to report settlements from car accident claims can result in consequences such as needing to pay back benefits, penalties on future benefit payments, and even sanctions that can suspend your SSI payments.

• Requirement to Pay Back Benefits: If the settlement amount is not reported on time and used in SSI calculations, the Social Security Administration may overpay you. If so, there is a high potential you will have to pay back some of those benefits under the administration’s guidelines.
• Penalties to Future Benefit Payments: Failing to report a settlement can result in penalties against future benefits. Penalties can potentially reduce your monthly SSI payment by a set amount, often between $25 and $100. In addition, these penalties apply any time you fail to report an income change of any type or fail to report the change before the designated deadline.
• Sanctions: Failing to report changes in income or making a misleading or false statement can cause the SSA to impose sanctions that can suspend your SSI payments as follows:
  • First sanction: withholding payments for six months
  • Subsequent sanctions: withholding payments for 12-24 months

In addition, continuing to receive regular benefit payments while knowing that you are withholding information about a personal injury settlement can potentially result in criminal charges and loss of SSI eligibility.

While you will understandably be relieved at receiving a settlement, you must remain diligent and report it to the government agency as soon as possible. Avoid losing your benefits by seeking legal advice from a trusted Michigan personal injury lawyer at Matz Injury Law. We will help you report your car accident settlement before the deadline so you can avoid any potential government-induced penalties.

How Existing SSDI Benefits Affect Your Michigan Personal Injury Settlement Value

If you were already receiving Social Security Disability Insurance before your Michigan car accident, your monthly SSDI payments will not be reduced by a personal injury settlement. The bigger issue runs in the other direction. Your SSDI status can lower what you actually recover in the personal injury case itself.

The Lost Wages Problem for SSDI Recipients

When the Social Security Administration approves someone for SSDI, it has officially determined that person cannot engage in substantial gainful work. That determination creates a practical problem in a personal injury case. Lost wages and lost future earning capacity are among the largest dollar components in a Michigan car accident settlement, and they require proof that the accident took income away from you. For someone already out of the workforce due to disability, that claim does not carry the same weight.

Michigan personal injury settlements for SSDI recipients therefore tend to be smaller than settlements for working individuals with comparable injuries. Medical expenses, pain and suffering, and quality-of-life losses remain fully available as damage categories. The wages component is where your claim will face the most significant reduction.

How Insurance Companies Use Your Disability History

Michigan insurance companies and defense attorneys routinely argue that a claimant’s pre-existing disability caused or worsened the injuries at issue in the accident. If you were already treating for back pain, a neck condition, or another physical impairment before the crash, the opposing insurer will push hard to attribute your current symptoms to the prior condition rather than to their driver’s negligence.

Your attorney will need medical records, treating physician statements, and potentially expert testimony to draw a clear line between what existed before the accident and what the accident itself caused. Without that documented evidence, insurers can justify a low settlement offer by pointing to your disability history as an alternative explanation for the full extent of your injuries.

How Much Can You Have Before a Settlement Affects Your Michigan SSI Benefits

Many Michigan SSI recipients want to know whether there is a specific dollar amount that will trigger the loss of their benefits. The answer involves two separate SSA tests applied at two different points in time: the income test for the month the settlement arrives, and the resource test starting the month after.

The Income Test in the Month You Receive Your Settlement

The SSA treats a personal injury settlement as unearned income in the month it is received. The SSA applies a $20 general income exclusion, then reduces your SSI payment by one dollar for every dollar of countable income above that threshold. A large settlement received in a single month will reduce your SSI check for that month and may eliminate it entirely if the settlement amount is large enough.

The Resource Test Starting the Following Month

In 2026, the SSI resource limit is $2,000 for an individual and $3,000 for a couple. Any settlement funds that remain in your possession at the start of the month after you received them are counted as a resource. If your total countable resources exceed the limit, the SSA will suspend your SSI payments for each month your resources remain above the threshold.

This is why the spend-down strategy discussed earlier in this article requires acting within the same calendar month you receive the settlement. Funds spent on allowable purchases before the month ends are not counted as resources in the following month. Funds that remain in your account on the first day of the next month count against the $2,000 limit from that point forward.

The Federal SSI Benefit Rate for 2026

The federal SSI benefit rate in 2026 is $994 per month for an individual and $1,491 per month for an eligible couple. Michigan may also provide a state supplement on top of the federal rate. Losing SSI eligibility because settlement funds were not managed before the monthly deadline means losing both the federal payment and any Michigan supplement for each month your resources remain above the limit.

What is the Difference Between SSI and SSDI?

Accepting a settlement after involvement in a Michigan car accident may come as a welcomed relief, allowing you to focus on recovery and easing your mind concerning financial burdens. Yet, if you are receiving government benefits prior to the accident, you will need to consider the effects a settlement can have on those benefits. The following types of benefits need review to determine if a settlement will affect them.

Supplemental Security Income (SSI)

Supplemental Security Income (SSI) is a need-based program calculation that pays monthly income benefits. This calculation is based on age, household resources, and income. For example, low-income adults over the age of 65 may be eligible for SSI benefits. Supplemental Security Income can be affected by auto accident settlements.

Social Security Income (SSI)

Social Security Income is based on employment history and Social Security payroll taxes paid by a person during their working years. It results in a monthly benefit once they reach a specific age. As such, car accident settlements will not impact these benefits.

Social Security Disability Insurance Income (SSDI)

Social Security Disability Insurance Income (SSDI) is given to individuals who are not able to work due to permanent disability. SSD payments for disabled individuals are not considered actual income by the Social Security Administration (SSA) and are not impacted by car accident settlements. However, any SSDI benefits received as a result of an injury suffered in a motor vehicle accident may be used to reduce any PIP wage loss benefits owed under a personal injury claim.

If you have questions concerning your SSI or Social Security disability benefits as a disabled person following a car accident and settlement offer, schedule a free consultation with a Michigan personal injury attorney to learn more.

How Can I Protect My Car Accident Settlement Money From SSI?

In addition to reporting a settlement to the Social Security Administration, you can take steps to protect your SSI benefits for the future. Your two options are to spend down your settlement or set up a special needs trust. Which way you go will depend on the amount of your settlement and your current financial needs.

Spend Down Your Settlement

Spending down your settlement means you use the lump sum settlement money you receive to make allowable purchases or pay off debts so that you remain eligible for your SSI benefits. However, if you choose this option, you must spend your settlement within the month that you receive it.

You still need to report the settlement in accordance with the SSA guidelines and be able to show how you spent the received funds. Potential ways to spend down your settlement may include:

• Paying outstanding medical expenses
• Paying off credit card or other back debts
• Purchasing or paying off a vehicle that has a title with your name
• Paying off your mortgage
• Purchasing a home with your name on the title
• Paying rent for that one month only
• Making necessary house repairs
• Purchasing needed appliances or furniture
• Applying to fees for hiring an experienced attorney (e.g., for Medicaid benefits or estate planning)
• Pre-paying funeral and burial expenses

It is essential that you maintain all receipts for anything you spend your settlement on, as these will be necessary for showing how you used the settlement funds.

Create a Special Needs Trust

Another way to protect your benefits and your settlement is to consider creating a special needs trust. A special needs trust is designed to provide for quality-of-life expenses not covered by government benefits. It is established to benefit you or your loved one with disabilities and prevent the loss of government assistance.

Under such a trust, a trustee is put in charge of the money and distributes funds as needed to the beneficiary to cover expenses not covered by SSI program guidelines, such as additional medical treatment, nursing care, transportation, and therapy services.

The role of trustee is critical as it requires diligent handling of funds so as not to jeopardize a beneficiary’s ability to continue receiving SSI benefits. Appointing a dependable and trustworthy trustee will be critical to your or your loved one’s future, so you will want to designate someone you can count on to make the best choices. The attorneys at Matz Injury Law will work with you to select the best trust fund to fit your particular needs.

Do You Have to Report a Settlement to Social Security?

If you are on Supplemental Security Income at the time of the accident, you must report any personal injury case settlement directly to the Social Security Administration. This is because the personal injury settlement amount is considered income and will affect your income-based benefits.

More specifically, the Social Security Administration requires that benefit recipients report changes that can affect SSI eligibility and amounts as early as possible and before the designated deadline, which is ten days following the end of the month in which the change in your income occurs. For example, if you receive a settlement on June 15th, you must report it to the Social Security Administration by July 10th.

Secure Your Finances With Matz Injury Law in Michigan

Being involved in a Michigan car, truck, or motorcycle accident and its aftermath can be stressful and overwhelming, especially considering the possibility of a long wait for a settlement. While a settlement can bring relief, it can negatively affect your monthly benefits from Supplemental Security Income if you are not careful.

For help and guidance with accident claims, insurance company settlement negotiations, personal injury lawsuits, or SSI benefits protection, consult the experienced attorneys at Matz Injury Law. We help clients in Michigan find the right way to secure their finances and feel confident in how a settlement can help, not hinder, the receipt of government benefits.

Contact our Southfield, Michigan law firm today by calling 1-866-22Not33 or using the online contact form to schedule a free consultation.