In a Bankruptcy, Will I Lose My Personal Injury Settlement?

In a Bankruptcy, Will I Lose My Personal Injury Settlement? "When filing for bankruptcy, one of the most common queries or concerns people have is whether they will lose any assets. The topic of retaining one's residence, automobile, and even income has been exhaustively discussed. However, one issue that has not received the attention it merits is whether an individual who has been injured in a car accident or other work-related accident will be able to retain their settlement funds.The federal exemptions are peculiar in that they tend to protect tangible assets but not intangible ones, such as a personal injury settlement, that are more valuable. At first glance, it may appear that a substantial quantity of money, up to $20,200, can be retained on a personal injury claim. However, upon closer inspection of the code, only lost wages and medical expenses appear to be protected, unless the ""wild card"" has been exhausted.Section 522(D)(11)(D) of the Bankruptcy Code allows exemptions for personal injury recoveries up to $20,200, excluding damages for pain and suffering and economic loss. In addition, you can claim an additional $21,625 in a wild card exemption if you have no equity in your property or do not own a home. So, what exactly does this mean? The manner in which your attorney and insurance company classify your settlement may have a greater bearing on whether or not you get to retain the money than the injury itself.The other factor that determines whether you get to keep any of the proceeds from a personal injury lawsuit is which of your creditors submit ""proof of claims."" These proof of claims are essentially documents filed by your creditors that corroborate you owe them money. If they fail to file these documents by the deadline, they forfeit their right to collect any liquidated funds in a Chapter 7 case. This is significant because it determines how much of your non-exempt assets can be liquidated. The Trustee may only liquidate up to the value of the filed proofs of claim, plus their own legal fees.It should be noted, however, that many states have their own exemptions from which a debtor may choose in lieu of the federal law. You should consult with a local bankruptcy attorney to determine which option is best for you.
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