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I file bankruptcy this year, if i get money from a settlement do I have to give it up to the trustee?

El Paso, TX |

I developed carpal tunnel a little before I file bankruptcy, if I file a lawsuit will they take any monies i get from the settlement?

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Attorney answers 4


Yes, to the extent that the value of the settlement exceeds any exemption that you can apply to this asset.

If the medical condition , and therefore the claim, for a personal injury exists before you file bankruptcy, it is an asset. This is regardless whether or not there is a lawsuit filed to collect on the claim before the bankruptcy is filed.

The amount of exemption will depend on other facts. It likely will include your claiming federal exemptions.
There may be an exception if the settlement occurs before the bankruptcy is filed, and if the settlement is placed in the form of an insurance annuity to you, it may become exempt in an unlimited amount.

General legal advice is offered for educational purposes only. A consultation with a qualified attorney is required to determine specific legal advice as to your situation and applicable law. We are a debt relief agency and we help people file for relief under the bankruptcy laws.

Peter Walter Weston

Peter Walter Weston


The trustee has the right to step in your shoes, evaluate the claim, and settle it, or bring suit and settle it. If the claim is worthless, he may abandon it, then you can take over again after the bankruptcy is discharged.


You raise several questions. You said you developed carpal tunnel shortly before filing, therefore there is a question about when your claim actually arose. Who is paying the settlement? What is it for? How are the payments to be structured? The way theses questions are answered could affect your rights under bankruptcy. Without more details I can't give you direction, but this is another example of where consulting a qualified attorney would probably save you money in the long run.

This response is intended to give a general overview of the law and should not be treated as legal advice. There are too many factual issues and exceptions in the law to provide definitive conclusions about your circumstances.


In many states, worker's compensation benefits are protected by an exemption available under state laws. If you disclosed this potential suit in your bankruptcy, you should have selected any pertinent exemption. If you failed to disclose this potential suit, you may not have any rights to pursue the suit at all unless there is time to go back & amend all your paperwork.

I am posting a link to a description of the exemptions in all 50 states for you to review.

Hope this perspective helps!


It is absolutely imperative that you make full disclosure of your claim in your bankruptcy schedules. If you don't, that can be considered a "judicial admission" that you do not have a claim, and your claim, if you later brought it, could be thrown out of court.

In addition, if it can be shown that you intentionally failed to disclose a claim, you could have your discharge denied and/or face criminal prosecution under federal law.

As the previous answers indicated, whether or not you can keep any money resulting from a settlement, particularly in chapter 7 bankruptcy, is dependent upon whether or not the settlement can be claimed as exempt.

In chapter 13, debtors usually retain all of their property, but must propose a plan that among other things, pays their creditors at least as much as the creditors would receive in chapter 7.

Chapter 13 can be particularly useful in allowing a debtor to remain in control of an asset such as a potential lawsuit, and take it to court or settle it on their terms, as opposed to allowing a chapter 7 trustee to control the disposition of the claim, and possibly settle it for a lower amount just to get the case settled quickly.

We are a debt relief agency and we help people file for relief under the bankruptcy laws.

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