Bankruptcy is a confusing and complicated process and can become even more complicated when you are expected to receive a personal injury settlement. Under these circumstances, you will need to speak with a personal injury lawyer about how this will affect your case.
How to Protect Your Personal Injury Settlement
The most important thing you can do is to disclose that you will be receiving a personal injury settlement. If it is later discovered that you were hiding your personal injury claim, this might lead to penalties from the courts. They may even choose to throw out your personal injury claim.
The state will not take all of your assets and will allow you to keep assets that they believe will be necessary for you to make a fresh start. For example, you will be able to keep some equity in your home and car. Your personal injury claim might also be protected based on the exemptions that exist in your state. However, you will want to consult with your personal injury attorney about this.
You may be able to use a wildcard exemption to leave some proceeds from your personal injury lawsuit. Whether or not this is available depends on the state in which you reside. There is a limit to how much you can claim both federally and on the state level.
There are also limits to which forms of compensation you can claim as being exempt. For example, if you receive compensation for medical bills, you may be able to claim this as part of your exemption. However, you will not be able to keep any compensation for pain and suffering.
Chapter 7 Vs. Chapter 13
The two most common forms of bankruptcy are Chapter 7 and Chapter 13. If you are filing a Chapter 7 lawsuit, the trustee will take full control of your lawsuit and will make decisions on how to proceed. The exempt portions of your lawsuit will be distributed to you.
The remaining funds will be distributed to the creditors. In rare cases, the lawsuit might bring in more money than you expected and may lead to some funds still being available of which you will be reimbursed.
If you file for Chapter 13 bankruptcy, you will be able to pursue your personal injury claim on your own. However, you may need to change your repayment plan and hand over funds that are not exempt to your creditors. Therefore, you will want to speak with an attorney about the best way to move forward with your bankruptcy and personal injury claim. Go to websites about bankruptcy for more information.