Bankruptcy and Personal Injury Lawsuits
If you are considering filing bankruptcy, and you have an ongoing or settled personal injury case, you likely have some questions.
Can bankruptcy take away injury settlements?
First and foremost, consult with both a bankruptcy and a personal injury attorney.
An attorney is a must in this situation. You need to know if your personal injury settlement will be exempt from the bankruptcy. Say you just received an offer for $20,000 to settle a personal injury lawsuit, but you have an ongoing bankruptcy. In this complex legal situation, a lawyer is crucial. Will the the trustee take your settlement money as part of the bankruptcy? You can potentially save this money by filing for Chapter 13 bankruptcy. If you file Chapter 7, it may lead to the trustee taking the money.
Second, find out if your settlement or compensation will be exempt.
You may not lose any money to the trustee. Usually you can list about $15,000 to be exempt when filing a Chapter 7 bankruptcy. Remember, if you file Chapter 13 bankruptcy, you are paying on debts – not eliminating them – which means you may have a better opportunity to protect your money. With so many differing state and federal laws, be sure to do some research and get a lawyer's help.
Third, know your rights.
You can fight certain things. You do not have to just watch the trustee take your money. As is often the case, most bankruptcy filers lose nothing – including your home, car, and any settlements you have ongoing. You can appeal that this money is necessary, and that it being taken would be a hardship. If this money is supposed to feed your family for 3 months, you might appeal. Once again, a lawyer is essential here.
Fourth, consider Chapter 13 bankruptcy.
Chapter 13 allows you to discharge your debt, but by paying on it over 3-5 years. A lot can change in 3-5 years. You might get a better job, get a raise, get new medical coverage, pay off all your other debts, etc. You will almost always be in a better situation. And though you do have to pay on debts, you stand to protect your home, car, other assets, and any settlements from being taken.
Finally, start doing your own research.
This research can and should be done with some lawyers. How will you afford all the legal fees? Typically your personal injury lawyer only takes his or her cut if you win. And bankruptcy lawyers are often very reasonable, understanding you likely need bankruptcy to save money, not spend it.