You’ve just settled your auto accident case and paid off your attorney, but you may still have crushing medical bills to pay that exceed the remaining balance of your settlement. What can be done? Can creditors come after your settlement that is supposed to be your nest egg? Not necessarily! You have to follow specific rules if you have to file bankruptcy on the medical debts.
It is bad enough to be injured in an accident, but to lose your claim for compensation can be devastating. Personal injury claims can be exempt in Chapter 7 and Chapter 13 bankruptcy are sometimes lost because the debtor failed to disclose the claim or did not know how to protect it. When in doubt, disclose everything.
A settlement is an asset like any personal property and it is your responsibility to disclose any settlement with your bankruptcy attorney and it should be listed on the bankruptcy schedules. If you do not, you may not be able to exempt the funds of the settlement and they could fall into the hands of the trustee.
Ironically, many claims lost for failure to disclose would have been exempt anyway, had the debtors listed them. By attempting to protect the claim by not disclosing it, the debtors in such cases lost out. (The courts have taken a hard line of late on undisclosed assets, even in cases where the entire claim would have been exempt had it been reported.)
Exempting Your Settlement or Claim
There are exemptions that can protect all or part of the proceeds of a damages award or a settlement. In Wisconsin, you can keep up to $50,000 from a personal injury award or settlement.
Although this exemption is limited and does not exempt compensation for pain and suffering and actual pecuniary (monetary or actual losses), there are often other ways to protect your claim.
Proper Bankruptcy Planning
If you’re settlement exceeds the $50,000 allowed in Wisconsin, you can used other exemptions and careful bankruptcy planning to exempt more of your settlement. It is essential that you speak with an experience Wisconsin Bankruptcy Attorney to walk you through the steps in securing your financial future and preparing for your bankruptcy.
Don’t lose your right to compensation for an accident. If you have been injured in a car accident or other incident, it is critically important to (1) tell your bankruptcy lawyer about any potential claim you may have, and (2) tell your personal injury lawyer that you are considering filing for bankruptcy. As you can see from the above, how an award or settlement agreement characterizes the damages can impact whether the funds are exempt. Your attorneys can work together to reach the best possible outcome for you.