Personal Injury Settlement and Bankruptcy

I am expecting a settlement as a result of a car accident and I am in bankruptcy.  What money is lost or kept in a personal injury law suit?

A settlement through a personal injury lawsuit is usually made up of a number of components including lost wages, reimbursement for medical expenses, property damage, and pain and suffering.  Money for pain and suffering or to compensate for loss of physical ability is not considered property that would be divisible amongst your creditors, which means you get to keep it.  Money received for the other components is likely to be paid to your Trustee.

Once a settlement has been reached, you should take a copy to your Trustee – they should be able to tell you how much you can keep.

There is an extremely important factor to bear in mind when considering filing for bankruptcy and when there is an outstanding personal injury lawsuit.  ALWAYS speak to a Trustee BEFORE you reach the settlement.  If the settlement is reached before bankruptcy, the money that you receive for pain and suffering loses its characteristics and becomes cash.  Cash is not an exempt asset and is divisible amongst your creditors.

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