When you file for personal bankruptcy in New York, you have the ability to exempt certain assets: in other words, protect them from your creditors. Personal injury awards and settlements up to a certain amount fall within this category, but the amount covered depends on whether you opt for the New York state or federal exemptions.
Federal personal injury exemptions
Under federal law, you may currently exempt up to $22,975 from a personal injury judgment or settlement. It only applies, however, to economic damages, such as lost wages, medical bills, and the wrongful death of a loved one whom you depended on for support. It does not cover non-economic situations like pain and suffering. Any portion of your personal injury income that is not exempt may be taken by your bankruptcy trustee and distributed to your creditors.
There is a federal â€œwildcardâ€ exemption that lets you protect up to $1,250 of any property you own, including personal injury settlements or awards that you received or may receive. If you donâ€™t use the full amount of the federal homestead exemption, which is intended to protect your home, then you can use it up to the value of $11,850 to protect your personal injury proceeds.
New York State personal injury exemptionsÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
New York state bankruptcy exemptions protect up to $7,500 of funds from personal injury proceeds. Like the federal exemption, it does not cover any amount paid out for pain and suffering. You can also use the state wildcard exemption of $1,000 to cover personal injury money if you opted not to claim the New York homestead exemption.
If your lawsuit is pending when you file
If you file for a Chapter 7 bankruptcy while your personal injury lawsuit is still pending, then it is important to be aware that your trustee can legally assume control of the case and settle it without obtaining your approval first. Filing for Chapter 13, on the other hand, allows you to retain control of your case, but any award that is non-exempt is still part of your bankruptcy estate.
Another thing to know: if creditors in your Chapter 7 proceeding fail to file their proven claims prior to the deadline, then they technically waive their rights to collect on a non-exempt debt such as personal injury proceeds that exceed the protected amount.
If you recently received a personal injury settlement or have a case pending and are planning to file for bankruptcy, then an experienced New York bankruptcy attorney can help you determine which set of exemptions is better for your circumstances. In some situations, the federal exemptions are preferable, while in others you may be better off with the state ones. If you have questions about a personal injury award and bankruptcy, then contact Jayson Lutzky, P.C. Mr. Lutzky is an attorney with over 33 years of experience and has helped many clients in both bankruptcy and accident cases. Call 718-329-9500 to set up a free in-office consultation. Visit www.MyNewYorkCityLawyer.com to learn more about Mr. Lutzky’s expertise.