One of the most common questions or concerns that people have when they file a bankruptcy case is whether they will loose any of their assets. The issue of retaining ones home, car, bank account and even wages has frankly been discussed to death. However, one issue that has not received the treatment it deserves is whether someone who has been injured in a car accident or some other work related accident will be able to keep their settlement funds or jury award. The bankruptcy federal exemptions are a funny thing, in that they tend to protect tangible assets, such as a home and car, but not give much protection to the more important intangible ones such as a personal injury or employment discrimination settlement. At first glace, it may appear that a significant amount of money can be retained on a personal injury or other tort claim, up to $20,200. However upon a closer inspection of the bankrutpcy code, really only lost wages and medical expenses seem to receive any true protection, unless you have not used up your “wild card” exemption.

The Federal bankruptcy law is quite clear on this issue; Title XI, Section 522(D)(11)(D) of the Bankruptcy Code allows exemptions of Personal injury recovery up to $20,200 except for pain and suffering or for pecuniary loss. Additionally, 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. So what does this actually mean? In plain simple English, the way your attorney and insurance company classify your settlement may have more importance on whether you get to keep your money then the injury sustained itself, or even the amount of the settlement or court award.

The other issue that comes into play when determining if you should be able to keep any proceeds from a personal injury, or other tort related case has to do with which of your Creditors (those companies who you owe money and have included in your bankruptcy petition under schedules D, E and F) file “proof of claims”. These “proof of claims” are basically a document and attached exhibits, that your creditors file with the Court and Trustee, which confirm that you in fact do owe them some specific amount of money. If a creditor does not file these documents in a timely manor, they waive their right to collect any money that may be liquidated in a Chapter 7 case by the Bankruptcy Trustee. Why this is important goes to the amount of your non-exempt assets that can be liquidated. The Chapter 7 Trustee can only liquidate assets up to the value of the proof of claims filed, in addition to their own legal fees incurred.

It should be noted though that many states have their own set of exemptions that a Debtor may choose instead of the Federal statute. You should certainly consult a local bankruptcy attorney to discuss which option would be better for you.

Author Bio: This article on bankruptcy strategy was drafted by Attorney Michael Goldstein of the Law Office of Goldstein and Clegg, LLC

Category: Legal
Keywords: bankruptcy, chapter7, exemptions, liquidated-assets, personal-injury