If you are injured in a car accident or some other work related accidents will you be able to keep you settlement funds or jury award, after filing for bankruptcy? The bankruptcy federal exemptions tend to protect tangible assets, such as a home and car, but does not give much protection to the more important intangible ones such as a personal injury or employment discrimination settlement. At first glance, it may appear that a significant amount of money up to $20,200, can be retained on a personal injury or other tort claim. But upon a closer inspection, only lost wages and medical expenses seem to receive any true protection, unless you have not used up your “wild card” exemption. To avoid much hazards, you can take debt settlement or debt consolidation into consideration.
The Federal bankruptcy law gives a clear verdict in this regard; under title XI, Section 522(D) (11) (D) of the Bankruptcy Code its clear that the exemptions allows of Personal injury recovery up to $20,200,except for pain and suffering or for pecuniary loss. In addition, if you have no equity in your home or do not even own a home, you can claim an additional $21,625 in a wild card exemption as a substitute for a homestead exemption.
The other factors that comes into play while determining your ability to keep any proceeds from a personal injury, file “proof of claims”. These “proof of claims” are documents and attached exhibits, that your creditors file with the Court and Trustee and which confirm that you do owe them some specific amount of money. If a creditor does not file these documents within a stipulated period of time, they waive their right to collect any money that may be liquidated in a Chapter 7 case by the Bankruptcy Trustee. The Chapter 7 Trustee is only allowed to liquidate assets up to the value of the proof of claims filed, in addition to their own legal fees incurred.
However, remember if a debtor has agreed to pay a settlement for personal injury and has that debt hovering over him at the time of filing for bankruptcy, he will continue to have that debt after his other debts have been discharged. In New York, usually debts incurred through intoxicated driving cannot be discharged. Moreover, if the creditor objects to the discharge of debts from willful and malicious injury to another person or property, the debtor won’t be able to discharge these debts.
To conclude, as many states have their own set of exemptions, it is highly recommended a debtor must consult a local bankruptcy attorney to discuss what options are available to him.