top Ad Widget

Collapse

Announcement

Collapse
No announcement yet.

Are proceeds from a personal injury settlement considered income or an asset?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Are proceeds from a personal injury settlement considered income or an asset?

    First, I want to say that I have a call into my BK attorney and am waiting for a response. I just wanted to post this here while I wait to hear from him to see if anyone has any experience with something like this.

    I received an unexpected letter yesterday from an attorney I hired around four years ago to investigate a potential personal injury claim on my behalf. I was advised that I will be receiving a settlement as a result of my claim in early 2009. I know with 100% certainty that in a normal non-bankruptcy situation the settlement proceeds would not subject to income or any other kind of tax in my state. However, because I am planning to file CH 7 in January, my situation is far from normal.

    Here's the question: Are personal injury settlement proceeds considered income or are they just considered an asset? I know it will be considered one or the other but I am not sure which. If it's considered income I will be pushed way over the state median and I'd be hosed. If it is an asset, my state allows for use of the federal BK exemptions, which would give me an approximate $17,000 exemption for personal injury settlement proceeds. So, in other words, that would be the portion that goes in my pocket that I could keep. My creditors would get the rest and I'd go from a no-asset case, which I am currently, to being an asset case.

    Anyone have any experience with this??
    CH7 Filed 2/26/2009 (no asset)
    341 Meeting 4/7/2009
    Discharged 7/10/2009
    Closed 7/28/2009

    #2
    It sort of depends on your state law.

    However, before the money is paid, it is an asset. After the money is paid..the issue is a toss-up. Generally, it probably becomes income at that point unless your state allows the money to maintain its exempt status once it is converted to cash.

    Comment


      #3
      Thanks, HHM. I suspect this is going to be a lot more complicated than I realized.

      What confuses me is how compensation for a physical personal injury could be considered income. I was physically harmed by someone and they are compensating me in the form of a monetary settlement in repayment for that harm. Obviously, they cannot give me back what they took from me. I am not receiving a gift, bonus, or other unsolicited monetary source, KWIM? I would definitely consider it an asset of my bankruptcy case and that a portion of it should rightfully go to my creditors but I just don't see how it could be defined as income.

      So, if it's considered income, do I tell the P.I. attorney to give my share to the other plaintiffs and kill my interest in the settlement or do I take the full settlement and try to wait six months for it to clear the income look-back period?

      I know... wait to see what my attorney says.
      CH7 Filed 2/26/2009 (no asset)
      341 Meeting 4/7/2009
      Discharged 7/10/2009
      Closed 7/28/2009

      Comment

      bottom Ad Widget

      Collapse
      Working...