Recently one of our clients was in a terrible car accident in Broken Arrow. The accident totaled his car and sent him straight to the hospital. Unfortunately our client didn’t have insurance on his car. Because of this, as insurance company’s always do, his claim was contested. In the end we were able to settle his case and get him a fairly lairage sum of money. By the time we got any where near the end of his car wreck case when his medical bills became overwhelming, his only decision was filing bankruptcy.
Although nothing can undue the physical damage from a personal injury, our client was ecstatic to learn that his personal injury settlement in bankruptcy is exempt from creditors. Read on or visit our bankruptcy blog and hopefully this article gives you some valuable insights in to the bankruptcy process.
How Does bankruptcy Work?
There are different forms of bankruptcy. By far the most popular bankruptcy is under Chapter 7 of the Federal Code. Bankruptcy is a legal method that can help you eliminate your debt and stop creditor calls. Sometimes, the process involves the liquidation of your non exempt assets to pay your credits. fortunately, most assets people have that are facing chapter 7 are exempt from the court and your creditors.
In Oklahoma, when filing for bankruptcy, assets you own are either exempt assets or non-exempt assets. Assets that are not ruled to be not exempt in bankruptcy can be sold or liquidated depending on what the asset is. You can use those proceeds to pay off any of your debt. An exempt asset cannot be sold to satisfy your debt.
Personal Injury Funds In Bankruptcy
Typically, a personal injury settlement in bankruptcy is considered an exempt asset. But there are some limitations. Oklahoma state law limits workers’ compensation and personal injury settlement amounts that are exempt. For workers’ compensation and personal injury settlements, only up to $50,000 of your settlement money will be an exempt asset that you can keep. This amount is what you get after paying attorneys fees and other costs associated with the personal injury settlement. Any money beyond the cap is non-exempt and you can use it to pay off your creditors.
Never Comingle The Settlement Money
This is the tricky part of the process. In order for the settlement funds to remain exempt the funds cannot mix in with money from other sources. Other sources include money from your paycheck or other funds in your checking account. It works like this; if you take your paycheck or money you get from anything else and put it in the same bank account that you have your settlement funds in the funds are comingling. For this and more reasons, it’s advisable that you do not commingle the settlement funds with other funds once you receive the settlement money. If you commingle the funds, your settlement funds can potentially lose their exempt status.
When You Claim The Personal Injury Exemption
Another suggestion is that you claim the exemption. When you file your case or during the process itself, if at any point you know you might obtain a potential settlement, you should claim it under the asset section of your bankruptcy schedule. The exemption will only apply if you disclose the settlement. Most likely, you will not be able to keep any settlement money a secret from a bankruptcy court. Furthermore, if you fail to disclose the settlement, the bankruptcy trustee may file an adversary proceeding. In this proceeding, the trustee will try to take your settlement by claiming you failed to list it. As a result, your settlement funds will lose their exemption status.
Moreover, when filing for bankruptcy, the court will examine past transactions you made within a specified period before you filed. This is known as the “look back” period. Typically, the period is one to two years before you file, but it can sometimes be up to ten years. That is why it is important to disclose any potential settlement proceeds you might obtain so that your money can secure exemption status.
Social Security Disability Claims in Bankruptcy
Like settlement money, disability awards are also exempt. Similarly, you must treat the proceeds correctly. The most common error is the comingling of funds. If the bankruptcy trustee feels that you comingled the money with non-exempt money, they will try and take the disability award from you. So that you’ll avoid unnecessary issues, be straightforward with your Oklahoma bankruptcy attorney. They can help you maneuver the procedure.
Bankruptcy Lawyer In Oklahoma
So now that you know your personal injury settlement in bankruptcy is exempt this should help you relax. Bankruptcy can be a little confusing but don’t worry we can help. Fortunately, our bankruptcy attorneys have filed tons of bankruptcy cases for financially strapped people in Wagoner County. If you are dealing with an unmanageable debt situation bankruptcy might be just what the doctor ordered. Chapter 7 or chapter 13 are both solutions that will help get you out of debt. Before you start liquidating retirement funds or going even further in debt look at bankruptcy as a potential option. To learn how our Wagoner attorneys can help, call and get a free consultation at (918) 283-7394 or contact us online.
