Navigating a lawsuit settlement during bankruptcy in New York can come with challenges, especially if you don’t know how settlements are categorized. It is important to approach bankruptcy with the knowledge you need to protect financial resources that may or may not be considered an asset in bankruptcy.
At Grady BK, PLLC, we approach all of our clients as though they were our only client, providing you with one-on-one care and attention. We strive to provide straightforward and honest guidance so that you can proceed with confidence when filing for bankruptcy. In this article, we will be discussing what happens to a personal injury settlement in Chapter 7 in NY, as well as in Chapter 13 bankruptcy.
Are Lawsuit Settlements Considered Assets in Bankruptcy?
Technically speaking, a lawsuit settlement is considered to be an asset when you file for bankruptcy. However, this doesn’t necessarily mean that you will have to give up that money.
There are several different factors that can impact how a lawsuit settlement is handled during bankruptcy in New York. For example, it may be handled differently depending on when you received the settlement, when you filed for bankruptcy, and how much the total settlement comes to. But the best way to protect your settlement when filing for bankruptcy is to use bankruptcy exemptions in NY, for personal injury cases.
Exemptions That May Protect Settlement Funds in New York
An exemption is an amount of money that either the state or federal government allows you to keep when you file for bankruptcy. These exemptions are in place to create a fair outcome where you will have a little financial stability instead of being completely broke after filing for bankruptcy.
New York has an exemption that allows you to keep a portion of a personal injury settlement depending on the nature of the award and the details of your case. Understanding how much you are allowed to keep can be quite confusing, as these exemptions are often based on the type of claim, such as claims related to bodily injury.
Also, federal law provides exemptions for personal injury settlements that usually allow you to keep a larger portion of your award. Federal law also has a wildcard exemption that allows you to protect even more of a settlement.
To understand more accurately how much of your settlement you can keep, you need to discuss your situation with a bankruptcy attorney in New York. They will have a more thorough understanding of state and federal government exemptions that you can use to your advantage.
How Timing and the Type of Bankruptcy Impact Settlements
When it comes to filing for bankruptcy, timing is everything. This is because filing dates will ultimately determine what assets are part of your bankruptcy estate.
In many cases, timing and the type of bankruptcy you file for will work together regarding how a lawsuit settlement is handled. For instance, if you file for Chapter 7 bankruptcy, your lawsuit may be safe depending on the day of the accident, not the day the lawsuit was filed. So, your settlement may be considered to be part of your bankruptcy estate and would need to be used to pay off creditors, or you may be able to keep some of it for yourself.
If you file for Chapter 13 bankruptcy, it is important to understand that this is considered to be an ongoing bankruptcy case as it creates a 3 to 5 year repayment plan. So, if you win a lawsuit settlement after filing for Chapter 13 bankruptcy, your winnings may still be considered to be part of your bankruptcy estate.
There are many factors that impact how a lawsuit settlement is used during Chapter 7 and Chapter 13 bankruptcy, which can make things very confusing. That is why you should hire a bankruptcy attorney who can help you understand what your options are and what you should expect.
Steps to Protect a Settlement With Your Attorney
Whether or not you are able to keep most or all of your lawsuit settlement is often dependent on circumstances outside of your control. These factors can include the settlement amount, the date of the lawsuit, the date you file for bankruptcy, and the available exemptions you qualify for.
However, there are certain things you and your attorney can do to make this process as simple and straightforward as possible. The main thing is to provide full disclosure when you file for bankruptcy so that you don’t run into any legal issues later on. A general rule of thumb to follow is that any type of asset or financial resource should be listed when you file for bankruptcy to avoid being suspected of fraud.
Your attorney can help you create a strategic plan to improve your chances of being able to hold onto your settlement. They can also help you find exemptions that you qualify for so that you can keep a larger portion of your lawsuit settlement.
FAQ:
Can I keep a car accident settlement if I file Chapter 7?
In some instances, you may be able to keep a portion or all of your car accident settlement depending on the amount and your situation.
What happens if I don’t disclose a pending lawsuit in my bankruptcy?
Failing to disclose a pending lawsuit when you file for bankruptcy is a huge mistake and could result in your settlement being dismissed or denied due to fraudulent behavior.
New York’s Top Compassionate Bankruptcy Attorney
If you are wondering if you can keep a settlement in bankruptcy, this is a complicated question. At Grady BK, PLLC, we can help you navigate all of the complexities of filing for bankruptcy with a pending lawsuit or after winning a settlement. We can help you choose the right type of bankruptcy as well as proceed with filing for bankruptcy in the best way possible.
At Grady BK, PLLC, we understand that the bankruptcy process can feel very intimidating, which is why we are here to provide support and guidance. Whether you have questions or concerns, we are here to help.
Contact us today at 315-299-9005 to discuss your situation with a bankruptcy attorney in New York. Our team at Grady BK, PLLC, is here to help you choose the right type of bankruptcy while protecting your financial resources.
