Archive for November, 2011

Accident settlement and bankruptcy – An inside look

Wednesday, November 9th, 2011 at 3:21 pm

Author Bio: The article is a courtesy of Anya Bennett of Oak View Law Group. She advises people to solve their financial problems like debt. For More details, you can visit http://www.ovlg.com/

Accident settlement and bankruptcy – An inside look

Sudden catastrophes like illness, accident or injury can ruin one’s financial life and can leave him helpless. A severe accident followed by dire consequences can leave you jobless or stuck with huge medical bills. In fact it can force you into bankruptcy as well. Now the obvious question that arises in this situation is if you file a lawsuit, because of the accident, will you be able to keep your settlement funds or jury award, after filing for bankruptcy? However, whether or not you are allowed to retain your settlements proceeds often depend on several factors, for example where you live, how much you have received as accident settlement compensation and when you have met with the accident. To know whether or not, the proceeds of your settlement would become the bankruptcy estate, read ahead.

What is bankruptcy estate Property?

Actually, whatever you own at the time you file for bankruptcy becomes bankruptcy estate property, including the property to which you are entitled, but has not received yet, such as tax refunds or lawsuit settlements. Don’t worry; there are ways to exempt your property from the estate and to safeguard it from bankruptcy. However, your exemption entirely depends on the type of property you have and the place you live.

Exemptions

Federal Bankruptcy Code governs bankruptcy and under section 522 of the Bankruptcy Code, a list of exemptions has been provided. If you are entitled to receive the proceeds of an accident settlement, the exemptions would vary depending upon the type of the -accident. From February 2011, you are allowed to exempt up to $21,625 received for personal injury, provided the money is not for pain and suffering or pecuniary loss. In case your settlement is for unfair death or for lost wages, you are allowed to retain any amounts that are required to support you and your dependents. In addition to this a “wild card” exemption is also there, which can be used for any type of property. The exemption amount is $1,150, including $10,825 of any unused home residence exemption.

The Bankruptcy Code usually offers the consumers a choice between federal and state exemptions laws. An individual state can opt out of federal exemptions altogether. If you reside in a state that has opted out of federal exemptions, you won’t qualify for exemptions under Section 522 at all and you will only be permitted to use your state exemptions.

After filing Bankruptcy

If you declare a chapter 7 bankruptcy, the portion of your accident settlement that you cannot exempt will be regarded as estate property, and therefore the Chapter 7 trustee will liquidate it. In case you are declared bankrupt, before you reach a settlement, the Chapter 7 trustee will take part in your settlement negotiations and will decide the time and amount of your settlements. Remember, in case of Chapter 13, the amount you pay to the unsecured creditors is generally determined, on the basis of your nonexempt amount.

Accident timing

Lastly, keep in mind if you meet with an accident after you file Chapter 7, proceeds are all yours, as you were not entitled to any proceeds during your bankruptcy filing. However, in case you receive settlement funds during a Chapter 13 case, regardless of when the accident occurred, the trustee will claim the funds, the moment they will figure out about the accident. This is because you have already committed that you will include all your disposable income into your Chapter 13 plan, unless and until you lack enough money to support yourself.

Keep the aforementioned points in mind, while dealing with accident settlement proceeding and bankruptcy altogether.