The Settlement Alliance

Does Bankruptcy Affect Personal Injury Settlements?

Does Bankruptcy Affect Personal Injury Settlements?

Jan 31, 2017

If you filed a personal injury claim prior to filing a bankruptcy or during an open bankruptcy, the bankruptcy could affect the disbursement of your settlement proceeds. In many instances, there are steps that can be taken to help preserve your personal injury settlement, even if you are involved in a bankruptcy.

Here are 5 key things to remember if you are involved in a bankruptcy and expect to be receiving a personal injury settlement:

  1. Tell your personal injury attorney if you have ever had a bankruptcy: whether explicitly included in your contract with your attorney or not, you have an obligation to tell your attorney about any bankruptcy proceedings. The more your attorney knows, the more they can help you.
  2. Disclose your personal injury settlement: not only do you need to tell your personal injury attorney about your bankruptcy, but you also have a legal responsibility to disclose your personal injury settlement to the bankruptcy trustee. Even if you try to protect your settlement proceeds by not disclosing them, bankruptcy trustees often look into court records after a bankruptcy case is closed. In most cases, the trustee can still go after your settlement, even if they find out about it years later.
  3. Make sure your personal injury attorney is communicating with your bankruptcy attorney: bankruptcy laws vary by state; your personal injury attorney may or may not be familiar with all of the applicable bankruptcy laws in your state. In some instances, the requirements of the settlement agreement (in relation to bankruptcy) may be even stricter than what is required by law. It’s always a good idea to make sure that your personal injury attorney and your bankruptcy attorney are on the same page.
  4. Ask your bankruptcy attorney about available exemptions: some states allow personal injury settlements to remain exempt from assets of the bankruptcy estate. There may also be federal exemptions that apply in your situation that will allow you to keep all or a portion of your settlement proceeds. However, exemptions are not automatically applied. Amended schedules must be filed by your bankruptcy attorney in order to claim the exemption.
  5. Work with an experienced settlement planner: A settlement planner can help educate you on your settlement options and will work with you, your personal injury attorney, and your bankruptcy attorney to ensure that all appropriate steps are taken to protect your settlement proceeds whenever possible.

For more information about how bankruptcy can affect your personal injury settlement, contact us today.

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