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In chapter 13, personal injury settlement...what should I do?

Mobile, AL |

Hi..I am currently in chapter 13 and lost my job due to medical limitations (not caused by work). I was told I could convert to a chapter 7 if I couldn't make the chapt. 13 payments. I also look to get a personal injury settlement...what should I do?

Should I convert from 13 to 7 before I get the settlement so that I can keep my settlement to help with furture medical bills and family. Will I even be able to keep my money after converting to 7...
or can I just dismiss my bankruptcy so that I can keep my settlement and then get in touch with the creditors myself and try to make a payment agreement?
Which is my best option in Alabama.
I don't want the trustee messing with my money....what should I do?

The injury happened 10 months after I filed chapter 13. so it was not listed in my chpater 13 filing because it had not happened yet. Does this mean that the settlement will be protected from the trustee and creditors?

Attorney Answers 4

Posted

Dismissing your case is certainly a possibility you should discuss with your attorney. If allowed, that would enable you to deal with your creditors directly. But dismissal is not automatic and you need your attorney to advise if you would be successful.

As far as converting to Chapter 7, that is a bit trickier. Technically, if you convert to Chapter 7, any assets you obtain after your Chapter 13 was filed (such as a settlement on a personal injury which occurred after your Chapter 13 case was filed) is NOT property of the Chapter 7 Trustee upon conversion UNLESS the conversion is made in "bad faith". You would need to consult with your attorney to see what constitutes "bad faith" in your jurisdiction.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/
Follow Me on Twitter: @bklawr

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2 comments

Asker

Posted

Can you explain in detail concerning the second paragraph of your explanation? What did you mean "IS NOT property of the chapter 7 trustee"......does this mean I should get my settlement before I file chapter 7 or after in order to keep my money? I am a little confused. (I haven't filed 7 yet but I also have not gotten a settlement either).

Mark Markus

Mark Markus

Posted

It probably doesn't matter either way. If you get the settlement before you convert to chapter 7 it might be harder to exempt (assuming you have exemptions available under applicable law to protect it, and assuming you even need to--as explained before). Thus, IF your conversion is not made in bad faith, then it shouldn't matter because neither the settlement nor its proceeds would become property of the Chapter 7 estate.

Posted

If the personal injury occurred prior to your filing your Chapter 13, then it should have been listed already in your Chapter 13 petition and if you had an exemption available for that, it should have been listed in Schedule "C". If the injury occurred after you filed your Chapter 13 case, then it most likely becomes an asset in the Chapter 7 and you would need to amend to include that and, if available exempt it under applicable law.

Exemptions are "protections" for value you have in certain assets such that they are "exempt" from collections. Every state has different exemptions amounts available. Exemption laws are based on the state where you resided for the 2 years prior to filing your bankruptcy case or, if you lived in more than 1 state during that period, in the state where you resided for the greater part of the 180 days prior to that 2 year period.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/
Follow Me on Twitter: @bklawr

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Posted

Don't do anything. Obtain a consultation with an experienced bankruptcy attorney in your jurisdiction ASAP. Please do not take this the wrong way, but the statement that you do not 'want the trustee messing with my money' indicates a fundamental misunderstanding about bankruptcy. It may not be so bad, without knowing all of the facts and context of your case, no one on this side of the computer can prescribe the correct solution to your issues. But, you need to obtain expert legal bankruptcy assistance ASAP if not sooner.

I do wish you the best.

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Posted

Answered a similar question last week from Mobile. Not sure if you are the same questioner or not but the other lawyers who have responded have given you good advice. In certain situations if you have not listed the injury claim on the bankruptcy filings, your injury claim can be voided and no one will collect anything. Consult with your personal injury attorney further about this or your bankruptcy attorney,

Following the course of action you have described to keep the trustee from messing with your money without talking to your lawyers could result in serious consequences for you.

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