Will I Lose My Injury Settlement in Bankruptcy?

June 12, 2024

Will I Lose My Injury Settlement in Bankruptcy?

You are afraid you will lose your  injury settlement in bankruptcy.  You filed for bankruptcy and now the trustee is holding your settlement as an asset.   Will you get any of this money back?  Unfortunately, it is very possible to lose your whole injury settlement in bankruptcy.  Sometimes, however, you can get some injury settlement money back.   There are two ways you can potentially keep your injury settlement in bankruptcy.  First, you can settle with the bankruptcy trustee.  Second, you can just wait and see what happens after all creditor claims are filed.

Not Losing Your Injury Settlement in Bankruptcy

The first way to no lose you whole injury settlement in bankruptcy is to settle.  Sometimes there are valid grounds for settling how much of the injury settlement you must turn over to the trustee. For instance, if you have done considerable work to achieve the injury settlement, you may be eligible for some form of settlement with the bankruptcy trustee.  You may not lose your whole injury settlement in the bankruptcy.  The trustee may simply agree to allow you to keep some of it for yourself.

Other times, there may be post-petition debts or expenses in relation to your injury case. This may be true sometimes even if the claim is a valid bankruptcy asset.  The bankruptcy trustee may make a deal to let you keep some of your injury settlement through the bankruptcy.

Keeping Some Injury Settlement due to Low Claims

Sometimes you can automatically keep some injury settlement funds in bankruptcy.  You may also be able to not lose your whole injury settlement by simply turning over the full amount and waiting.   First, the trustee will add up all claims. Them the trustee will determine whether you are entitled to having some of the injury settlement returned to you.  This may be more possible with a very large injury settlements.  Also, rarely there are low claims filed on a bankruptcy case for various reasons.  Your attorney may be able predict if any of this math is in your favor by reviewing these claims.

Some States Protect Personal Injury Settlements

About 18 states allow a federal exemption that protects some personal injury settlements.   Other states, like Tennessee have a state exemption that protects some injury settlements.  States like Indiana and many states do not protect injury settlements. You will need to check with your local attorney. Your state’s exemption may give protection to not lose your whole injury settlement in bankruptcy.

Check Your Own State’s Bankruptcy Exemptions

How to Use Indiana’s Bankruptcy Exemptions

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