In all states, the law considers workers' comp benefits to be income in the "means test" that determines whether you are entitled to bankruptcy protection, under either Chapter 7 or Chapter 13. Some state laws do allow a trustee to seize a work comp settlement that you have modified.
Can Chapter 13 take my workers comp settlement in Illinois?
Illinois' bankruptcy laws do not include an exemption for workers' compensation awards. Instead, the presumed exemption comes from the Illinois Workers' Compensation Act, which states that workers' compensation benefits are not subject to liens or garnishment.
Can I spend money after filing Chapter 13?
Spending Money After Filing Chapter 7 or Chapter 13 After that, your money is yours to do with as you please, up to a point: if you need to make a large purchase such as a car or a house, you might need the court's permission. Consult with your attorney.
What happens to your bank account when you file Chapter 13?
Generally speaking, the funds you have in your bank accounts are safe when you file for Chapter 13 bankruptcy. Debtors filing for Chapter 13 bankruptcy ordinarily do not have to worry about what will happen to their checking or savings accounts.
What happens if you win a lot of money while in Chapter 13?
If you have a “windfall” anytime during the life of your Chapter 13 payment plan, the proceeds will go toward paying your creditors through the chapter 13 plan. This can sometimes pay your case out early and you will receive an early discharge from your bankruptcy so that you can begin rebuilding your credit.
Does Chapter 13 take your tax refund?
Some Chapter 13 Plans require debtors to pay into the plan their federal tax refunds. Typically, tax refunds are required on all cases where unsecured creditors are paid less than 70%. If tax refunds are required in the plan as payments, it will be stated on your confirmed plan.
Does trustee check your bank account?
The accounts will usually be unfrozen the same day. Thirdly, during your bankruptcy, for the trustee to perform income contribution assessments on each anniversary of your bankruptcy, the trustee will ask for copies of your bank statements.
Can trustee take tax refund after discharge?
No, the trustee can only take the portion of your refund that can be traced back to before your case was filed. So, if someone files on March 30, the trustee can only take 1/4 of the refund. That's because as of March 30, there are three quarters left in the year, so the pre-filing portion of the refund is only 1/4.
3 attorney answers
Workers Compensation benefits are generally exempt in a bankruptcy proceeding. I have practiced WC law in Virginia for 35 years and that is the case here. You should check with the WC lawyer about this. Even if it is a settlement it should not lose its exempt status as long as the monies are not co-mingled with other non-exempt assets.
Robert A. Stumpf
It sounds as though there was miscommunication about the need for your WC attorney's employment to be approved, but it is a requirement because he will paid from assets that belong to your bankruptcy estate.
What is injured workers law?
The Injured Workers Law Firm is a Richmond, Virginia based firm solely focused on serving clients with workers' compensation claims in Virginia. If you have questions about your benefits or if you would like more information on the Virginia workers’ compensation system, order our book, “The Ultimate Guide to Workers’ Compensation in Virginia” , or call our office today (804) 755-7755.
What is the number to call for workers compensation in Virginia?
If you would like more information on the Virginia workers’ compensation system, order my book, “The Ultimate Guide to Workers’ Compensation in Virginia”, or call our office today (804) 755-7755.
What is work comp insurance?
Workers' compensation laws provide for medical services and cash benefits to workers injured on the job. The laws protect employers from legal liability for the injury, while work comp insurance companies provide benefits according to the requirements of state law governing work comp claims. Workers who have filed a claim have the option to settle it by accepting a lump-sum payment, which ends the insurance company's obligation to provide medical and monthly cash benefits.
How does Chapter 7 bankruptcy work?
After you file a petition for Chapter 7 bankruptcy, the court appoints a trustee to manage your estate -- all of your assets that are not exempt and that can be liquidated (sold) to pay your creditors. In a Chapter 13 bankruptcy, the trustee sets up a repayment schedule, which allows you to make monthly payments over several years on a portion of your outstanding debts. When the process of liquidation or repayment is complete, the bankruptcy is discharged. A discharge legally closes the case and cancels all debts that the law considers "dischargeable."
What happens if you file for bankruptcy?
In bankruptcy, a workers' compensation case is considered a part of your estate; any claim for benefits is an asset that the trustee may take into consideration , as long as the case remains open.
Can a trustee seize a work comp settlement?
Some state laws do allow a trustee to seize a work comp settlement that you have modified. For example, in California, if you agree to an advance payment on the settlement, or to structured settlement payments from a third party, the money may become "non-exempt" and subject to seizure by the trustee.
Can you file for bankruptcy with a state exemption?
Some states allow you to choose between state and federal exemptions when filing for bankruptcy protection. However, there is no provision in federal law for the exemption of workers' compensation benefits. Therefore, if you file for bankruptcy, you would have to select the state exemptions in order to protect the workers' comp settlement while the bankruptcy case is open.
Is workers comp considered income?
Each state has its own laws spelling out which assets are exempt from seizure by the trustee. In most cases, this includes workers' compensation cash benefits, which are considered income. Some states exempt benefits that are paid prior to or during the bankruptcy; other states do not exempt settlements paid before you file for bankruptcy. In all states, the law considers workers' comp benefits to be income in the "means test" that determines whether you are entitled to bankruptcy protection, under either Chapter 7 or Chapter 13.
How much can you claim in Chapter 7 bankruptcy?
Chapter 7 bankruptcy rules allow you to exempt up to $21,625 of your personal injury claim from forfeiture, as of 2012. These exemptions are intended to allow you to keep sufficient property so that you can maintain shelter, transportation and employment. Some states also allow you to use a wildcard exemption for any asset of your choice, which you may also elect to apply to your personal injury lawsuit, in addition to any other applicable exemptions.
Who can take control of a personal injury lawsuit?
Under this authority, the trustee may take control of the lawsuit and pursue your personal injury claims. If the trustee is successful in getting a settlement or judgment against the defendant, any proceeds will likely go to your creditors. If the trustee recovers more money from the defendant in the personal injury suit than you owe your ...
What happens if you don't disclose your personal injury claim?
Failure to disclose your personal injury claim to the bankruptcy trustee may cause you to lose your rights to recover any money in your lawsuit. The defendant may seek to dismiss your case because the bankruptcy trustee possesses your right to sue after you file bankruptcy. If your bankruptcy is still pending at the time you are litigating your ...
What is breach of settlement?
What Is a Breach of Settlement? If you are on the verge of filing for bankruptcy because you lost your job due to an injury, you may find yourself in bankruptcy court seeking protection from your creditors and in state court pursuing a personal injury claim. You must work with your attorneys carefully, and disclose any personal injury claims to ...
What happens if you file Chapter 7 bankruptcy?
If you file under Chapter 7 of the Bankruptcy Code for protection from your creditors, the bankruptcy trustee may sell your assets to pay your debts. After these assets are sold and your bankruptcy case is closed, your remaining eligible debts are discharged. Read More: Stages of Bankruptcy.
What assets are required to be disclosed in bankruptcy?
Asset Disclosure. Bankruptcy rules require that you disclose all your assets to the trustee, including your home, car, jewelry, investments and any other tangible or intangible thing of value. The definition of asset also includes any lawsuit that you may have filed or that you have the right to file. Since you may have a right to recover money ...
Can you use a wildcard exemption for personal injury?
Some states also allow you to use a wildcard exemption for any asset of your choice, which you may also elect to apply to your personal injury lawsuit, in addition to any other applicable exemptions.
