How to Determine If Creditors Have a Right to Your Personal Injury Settlement

10 September 2020
 Categories: Law, Blog


If you have been involved in an accident, the expenses you face can be enough to put you in serious financial straits. In some cases, you may even consider filing for bankruptcy in response to the financial strain you are facing. However, if you are likely to receive a settlement as a result of your accident, your bankruptcy might impact your personal injury case.

1. Bankruptcy and Your Assets

When filing for bankruptcy, you are required to disclose any assets that you own. If you receive a settlement, you will need to include this as well. However, once you have done this, you may be able to protect your personal injury assets with exceptions. 

2. Federal and State Law and Your Personal Injury Claim

State and federal laws affect your personal injury claim; even under federal law, you will be able to protect up to $26,000 of your benefits to pay for medical expenses. Any compensation you receive for pain and suffering, however, will not be exempt under federal law and may be used to reimburse your creditors. Exemptions can be complicated and you will want to speak with an attorney regarding when you will qualify.

3. The Timing of the Injury

If you suffered an injury after you filed for bankruptcy, you will not have to worry about disclosing it and you will be able to keep your recovery if you file Chapter 7. The purpose of Chapter 7 is to discharge your debt so that you can get a fresh start. However, if you mix your settlement with other funds, you may find that you can no longer protect them because the courts might argue that it may be difficult to separate your assets. Therefore, you may want to keep your settlement in a separate account.

If you are injured and you decide to wait until after bankruptcy to seek compensation for personal injury, you might be considered criminally liable. This is because the creditors will look back at when you filed the claim to determine when the injury occurred.

Also, if you wait to file a personal injury claim, you may be less likely to win it in the first place. Evidence tends to disappear over time and the defense might argue that you must not have been very injured if you didn't file a claim right away. Fortunately, with a personal injury attorney, you can have a much easier time knowing how to proceed.