If you plan to file a Chapter 7 bankruptcy but recently won a settlement from a lawsuit, you may have concerns about how much, if any, of your settlement has to go to the bankruptcy trustee. Chapter 7 bankruptcy requires you to turn many of your assets over, but you may be able to keep some of your settlement after your bankruptcy. Keep the following in mind:
Personal Injury Exemption
In some states, you will be able to keep most or all of your settlement you received from a personal injury lawsuit. If your injury resulted in a permanent disability and the lawsuit settlement was meant to provide support for you because you are no longer able to work, the court may allow you to keep a portion of your settlement. You will have to show proof of your living expenses to the court so they can determine an appropriate figure you can keep as a source of income.
In some states, there are not exemptions to a bankruptcy. If this pertains to you, you can then utilize federal exemptions. Federal exemptions allow you to retain a certain percentage of your settlement as decided by the court. The amount will come from any money you received to pay your medical expenses from the injury. This does not apply to any money you have received from punitive damages or money you received for use as an income replacement. Most federal exemptions will let you retain this money to a certain amount.
If you have a smaller settlement, you may qualify for a wildcard exemption as long as it exists in your state. A wildcard exemption lets you retain a portion of your settlement money to a specific dollar amount. Your state will determine exactly how much money you are allowed to keep. If the money you won in your settlement falls below the specific limits set by your state, you will be allowed to keep your settlement.
Filing for a Chapter 7 bankruptcy is a significant deal that requires a lot of thought and understanding. You must use a qualified chapter 7 bankruptcy lawyer to help you navigate the process to ensure you are afforded all of your rights. Your attorney will have information for any and all exemptions for which you qualify in your state to help you keep as much of your settlement and property as possible.
Hello, I'm Christina Miller. Have you ever been fascinated with why the law works the way it does? Ever since I was in junior high, I had an intense interest in anything related to our legal system, whether it be a crime drama on television, a judge show or a legal case covered on the news. I followed it all. As time progressed, I began learning about how the actual legal system worked and not just the fictionalized version of our legal system. This has lead me to start writing my own blog posts about law that I hope will help others.