First of all, please be advised that I practice in Georgia and not in New York and thus New York laws may differ on this case. I practice in both personal injury and bankruptcy and I have had clients in similar situations. Most states like Georgia have property exemptions that you can claim to keep in bankruptcy. In Georgia, a Debtor can claim up to $10,000 of a personal injury settlement. For instance, if your personal injury claim yeilded a $50,000 settlement (less $20,000 in medical expenses and 16,500.00 atty fees assuming the standard 33% contingency) you would have $10,000 for your own and $3,500 available to your general unsecured creditors.
Irrespective of whether you settle your personal injury claim before or after you file, you will have to list this on Schedule B as an asset of the estate. Failure to do so may land you in serious trouble if the Trustee finds out. There is case law to support that Debtors who fail to list their personal injury claims on their schedules may not later claim exemptions if the Trustee can prove by clear and convincing evidence that you acted in bad faith and attempted to conceal assets.
I would advise that you notify both your personal injury attorney and your prospective bankruptcy attorney in New York to provide you with the exact exemption amount for personal injury claims since this differs from state to state.
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The lawsuit will become part of the bankruptcy estate and you will likely get to keep only $7,500.00 if you file. If the award is large enough to pay off all of your debt then you will get the $7,500.00 minus the attorney fee and minus the debt.
The only benefit to filing now is that it freezes the debt and allows you to pay it off at todays value years later. the biggest downside is the the Trustee can settle your case for far less than you think it is worth IF it is a big enough case.