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If I file chapter 7 can they take my workman comp lump sum payment to pay off creditors

Largo, FL |

I have a large amount of monies that I was paid for an injury I received on the job.from wormans comp.

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Attorney answers 3

Posted

It would depend on what you were paid for and how you were paid. If, for example, you are saying that you got a large lump-sum payment for settlement of your workers' comp case, then, once the money hits your bank account, it's the same as any other money that you have. Sometimes, though, with large settlements, parts are allocated for medicare set-aside trusts. I doubt (but am not certain) that money set aside in trust specifically for future medical benefits could be pulled into the estate to satisfy creditors. You should contact a bankruptcy attorney with this question, and be sure to bring ALL documentation that you have related to the lump-sum payment, bcz, just like most comp attorneys don't know bankruptcy, most bankruptcy attorneys don't know comp.

Posted

Your benefits, the worker's compensation settlement proceeds, " . . . shall be exempt from all claims of creditors, and from levy, execution, and attachments or other remedy for recovery or collection of a debt, which exemption may not be waived. However, the exemption of worker's compensation claims from creditors does not extend to claims based on an award of child support or alimony." Fla. Stat. 440.22. So, unless you owe past due child support or alimony, your proceeds should be precluded from consideration in your bankruptcy. I still believe that you should contact your bankruptcy attorney to confirm, but the law is as stated above. I don't practice in the area of bankruptcy. If you're settling this case with an attorney, you can ask them about the matter.

Posted

With all due respect to Mr. Stewart, I strongly disagree with his interpretation of the law. The section he quoted states that: "No assignment, release, or commutation of COMPENSATION or BENEFITS due or payable under this chapter except as provided by this chapter shall be valid, and such COMPENSATION and BENEFITS shall be exempt from all claims of creditors, and from levy, execution and attachments or other remedy for recovery or collection of a debt, which exemption may not be waived." A lump-sum settlement is NEITHER compensation nor benefits. The protection from creditors is only effective while the case is still open.

Jeffrey Scott Badgley

Jeffrey Scott Badgley

Posted

This is not true. Mr. Stewart is right. This issue has been addressed by the Florida Supreme court and by several Florida bankruptcy courts. See Broward v. Jacksonville Medical Center, 690 So.2d 589 (Fla. 1997)(holding that lump sum worker's compensation settlement that debtor deposited into savings account is exempt from creditor's claim); In re Mix, 224 B.R. 877 (S.D. Fla. 2000)(proceeds of workers compensation lump sum settlement remain exempt even if commingled with other funds); In re Harrelson, 311 B.R. 618 (M.D. Fla. 2004)(holding that used to purchase equity accounts remain exempt). However, if a debtor pledges their workers compensation settlement money as security for a loan, they may loose their exempt status. Sullo v. Cinco Star, Inc., 755 So.2d 822 (Fla. 5th DCA 2000). As long as a debtor has taken care to preserve the exempt status of the proceeds of a workers compensation lump sum settlement, those funds should remain exempt during a bankruptcy.

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