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Can I Keep My Personal Injury Settlement if I File for Bankruptcy?


After a devastating car accident or slip and fall, many victims negotiate a settlement to help compensate them for medical bills, lost income, and pain and suffering. These settlements often provide crucial support to injured victims, allowing them to keep the lights on as they try to recover and return to work.

But what happens to that settlement if you file for bankruptcy protection? The bad news is that you probably can’t keep all of your settlement. The good news is that you might be able to keep some of it.

Chapter 7 and Your Personal Injury Settlement

Chapter 7 is the faster of the two main consumer bankruptcies (the other being Chapter 13). In exchange for wiping out certain debts, the trustee can take non-exempt property and sell it, before distributing proceeds to your creditors. A Chapter 7 often takes only a few months to complete.

Unfortunately, your personal injury settlement is considered an asset, just like the car in your driveway. When considering bankruptcy, a person needs to analyze whether they can exempt their settlement, and how much they can exempt. Any part of the settlement that is non-exempt can be seized by the bankruptcy trustee and given to creditors.

There’s good news if you obtained a settlement because you were injured in a hazardous occupation. Fla. Stat. § 769.05 prevents garnishment or execution of any settlement proceeds for people injured in these jobs. Under § 769.01, hazardous occupations include:

  • Railroading
  • Operating street railways
  • Generation and/or sale of electricity
  • Telephone and telegraph business
  • Express business
  • Dynamiting and blasting
  • Boating (if boat is propelled by gas, electricity, or steam)
  • Operating a motor vehicle for public use

For example, if you were injured while driving a public bus, then your settlement will be exempt during a Chapter 7 bankruptcy.

Other settlements are at risk, and you would need to determine whether you can use a different exemption. In Florida, all people who file for bankruptcy get to use $1,000 for personal property, which you can use for a personal injury settlement. If you did not use a homestead exemption, you can exempt up to $4,000 in personal property. This might not sound like much, but it is a start.

Settlements and Chapter 13

A Chapter 13 lets consumers keep non-exempt property. However, they make regular payments in a three- to five-year payment plan. If you receive a personal injury settlement, you will need to use some of it to pay your creditors each month.

The amount will depend on your circumstances, such as the trustee and the amount of disposable income you have. It is unlikely that you will lose everything in a Chapter 13, but you will probably have to contribute a sizeable percentage.

Contact Nowack & Olson Today

Our team has years of experience helping distressed consumers navigate the bankruptcy process, including helping them keep as much property as possible. If you have been injured in an accident and are considering bankruptcy, please contact a Plantation Chapter 7 bankruptcy attorney at Nowack & Olson, PLLC today. We offer a free consultation to those who call 888-813-4737.


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