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Personal injury settlement exemptions (Missouri)

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  • Personal injury settlement exemptions (Missouri)

    I am not sure if this is the correct forum but I just got notified about my personal injury settlement today. I have not filed bankruptcy yet, told any creditors that I will (if it matters) or have been sued.

    However I am not sure what I can and can't do, and searching around I have not been able to find much on my states laws in regards to settlements. I know I need to speak with an attorney (and will), but I thought some people might have had experience with this. So I figured I should try and get some information to tide me over.

    First of all my settlement isn't huge, I got an offer today that after attorney fee's leaves me with about 14k. I am slowly drowning so anything to catch me up and take care of some things would be amazing. However I have no idea IF I can use any of it, or if I will be handing it all over to the creditors. And if I do spend it, that if it could disqualify me from filing.

    So a few questions, one can I use any of it before filing? I wasn't sure if I was not in process yet if that was possible. If I can I would need to use it for home repairs (not upgrades), auto repairs and to pay for childcare and some of my wife's schooling (books, etc). AND to catch up my house payment. It wouldn't be leisure if it matters.

    Third are there any exemptions that allow people to keep their personal injury settlements (auto accident) and protect it from the bankruptcy process? In either chapter? As I mentioned I live in Missouri, and I only can find the federal law.

    Thanks guys!


  • #2
    Of COURSE you can use your settlement proceeds--or any other money you have--to pay for living expenses prior to filing. Not only you "can", but you should. The only thing you are not allowed to do it make preferential payments on unsecured debt, i.e. paying toward one credit card while letting the others go unpaid. Your mortgage is a secured debt, so you can get it paid up without any worry.

    Once you are ready to file, then make sure your bank account balances are below the amount which can be exempted in your state.

    Comment


    • #3
      Thank you so much for the reply. The entire topic seemed vague looking around online. I believe my attorney had told me the same thing but we had been holding off until this is done. However I did come across some mentions of possibly being disqualified from Ch7 (if spent), and in Ch11 having to pay all of the creditors what you would've normally during the plan. It might've been in regards however to receiving one after filing.

      Does it matter on what state you are in? (I also noticed state law trumps fed).

      Anyhow that is really great news. And means I can get everything taken care of prior, and even pay for my wife's school stuff for this next semester. Now I wouldn't go on some vacation, but I am curious if there are restrictions on what it can or cannot be spent on?

      This is one of the few "good news" situations that I have had in awhile. =) Thank you!

      Comment


      • #4
        I need to add a few questions onto this (so I don't spam the forum). Hopefully someone see's it and can help me out.

        I just spoke with my personal injury attorney and we are going back and forth a bit on our settlement amount. It looks like I will get something back but considering I am not familiar with how bankruptcy works fully in regards to settlements I wasn't sure on how this all plays out.

        First off my attorney mentioned paying the outstanding medical expenses through the settlement itself. Which brought to mind the fact that you can not pay any unsecured debts prior to filing. If you pay some and not others it can be marked as fraudulent in normal circumstances (if I am correct). Or something like that. So I am wondering IF there is some exception in these situations due to the settlement being directly tied into medical expense compensations? If there isn't an exception does that mean it ends up being like I paid some unsecured debts and not others causing me to no longer qualify to file?

        Outside of that I am wondering if anyone has been in the situation where they had medical expenses to pay from a settlement (this is kind of off topic of forum) directly. At the moment I only have a handful of bills. However each one is MY expense (outside of one) against my deductible. So say one procedure cost 3,000, but I was billed for 700. And so I now have a collection in the amount of 700. Out of the settlement do I end up paying 700 back I personally owe or do I have to pay 3,000? Not one of the places asked for anything outside of the bill amounts I have gotten, or put a lien on a future settlement. And now all of the bills have fallen to collection companies. I am not sure if that changes the situation?

        Thanks guys!

        Comment


        • #5
          There are some strategies that I have read in the past regarding settlement strategies. One of them is to make sure that the medical expenses are actually classified in the settlement as medical expenses. Also, there is some language specific to whether or not the rest of the proceeds are for "pain and suffering" or general damages (because exemptions may matter!). These considerations can be important and there are differences between settling before and during bankruptcy. I'm surprised that your personal injury (PI) attorney is not providing you with basic strategy answers on how to pay the medical creditors.

          I would consult a bankruptcy attorney before finalizing the settlement to make sure everything is good. If you wait to file bankruptcy before settling, the Trustee could get involved.

          Now, if you settled and paid the medical creditors and the Trustee found that the language in the settlement made it just "free" money, then the Trustee could claw back the money from the creditors. The debt would still be discharged and you would not owe the medical debt (nor could they pursue you for collection). This is called a preference action and Trustees are keen to these clawbacks. In other words, it is really not your problem if the Trustee claws back the money; the underlying obligation to pay the debt is still discharged.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment


          • #6
            Originally posted by Taipans View Post
            IThird are there any exemptions that allow people to keep their personal injury settlements (auto accident) and protect it from the bankruptcy process? In either chapter? As I mentioned I live in Missouri, and I only can find the federal law.

            Although I have not had this happen, my research indicates that while you can use exemptions to protect the settlement Federal exemptions are not permitted in Missouri, you have to use the state exemptions which are not as generous as the Federal exemption. https://www.nolo.com/legal-encyclope...xemptions.html

            There is a good deal of info out there on the BK and personal injury settlements and how they are treated. As JB says, there may be strategies that can be used to keep the Trustee from giving the settlement to the unsecureds. Also, you may have to disclose the settlement in your petition and not disclosing it could make things worse. Check with a BK attorney on that point.
            Filed Ch 13 Fall 2013, 60 month plan

            Comment


            • #7
              Originally posted by justbroke View Post
              There are some strategies that I have read in the past regarding settlement strategies. One of them is to make sure that the medical expenses are actually classified in the settlement as medical expenses. Also, there is some language specific to whether or not the rest of the proceeds are for "pain and suffering" or general damages (because exemptions may matter!). These considerations can be important and there are differences between settling before and during bankruptcy. I'm surprised that your personal injury (PI) attorney is not providing you with basic strategy answers on how to pay the medical creditors.

              I would consult a bankruptcy attorney before finalizing the settlement to make sure everything is good. If you wait to file bankruptcy before settling, the Trustee could get involved.

              Now, if you settled and paid the medical creditors and the Trustee found that the language in the settlement made it just "free" money, then the Trustee could claw back the money from the creditors. The debt would still be discharged and you would not owe the medical debt (nor could they pursue you for collection). This is called a preference action and Trustees are keen to these clawbacks. In other words, it is really not your problem if the Trustee claws back the money; the underlying obligation to pay the debt is still discharged.
              Thank you, you brought up a lot of questions I didn't even think to ask. My PI attorney did mention that she wasn't familiar with the BK process, but I am going to get more clarification today on how it will be handled. I just hope I can keep some of it due to needing to pay my attorney and catch up on my house payment. So in your opinion do you think it's best to settle prior to filing or after / during? I wasn't sure which usually ends up the better outcome. I am hoping it holds true that I can use the money for legit living expenses as I need some things fixed on my home and car. Which would be extremely helpful before I file.

              Thank you again!

              Comment


              • #8
                If you don't settle prior to filing bankruptcy, the bankruptcy Trustee (especially if you're filing Chapter 7), will likely insert themselves into that process to maximize the settlement on behalf of the unsecured creditors. If you settle prior to filing your bankruptcy, you should be able to certainly pay your BK attorney and catch up on secured debt payments (your home/car) without any issues in the bankruptcy. But, since this settlement related, I would make sure I spoke to a BK attorney real soon (why not try a couple of free consultations?).
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog


                I am not an attorney. Any advice provided is not legal advice.

                Comment


                • #9
                  Definitely get this settlement business ...settled... before filing bk. You want to know exactly how much you're getting, and if there are any requirements for how it must be spent. Then you want to spend it the way YOU intend to spend it. Why get a trustee involved in that, if you don't have to?

                  I can't see in any case how you would be responsible for a $3,000 procedure if *you* are only being billed for $700.

                  How great it would be if you were able to use this money to pay medical bills (if required), AND pay your attorney, AND get caught up on your secured debts before filing. School expenses, home repairs, necessities -- these are not things that are going to be questioned.

                  I think your worry about preferential payments to unsecured creditors is not something that would apply in this situation. If a requirement of this settlement is that you pay the medical bills due, then you do that. It's what was required. That is completely different from, say, paying back your brother the $5000 you borrowed, while not sending ANY to credit cards.

                  Comment


                  • #10
                    Thank you guys, that really makes me feel less stressed.

                    I wouldn't be using the money for anything outside of my home and car repairs as well as my attorney fees. I am glad to hear that the settlement in regards to paying those medical bills wouldn't be considered a violation.

                    Looking around on the net I came across some places (hospitals and such) that attempted to collect on the full amount that they were charged. And / or your insurance company wanting the money back they covered. However it was also noted that it was considered illegal in some cases for them to do that. Anyhow that is why I asked that specific question. I am glad to hear that the collection amounts should be the only thing paid back out of the settlement.

                    As always I appreciate everyone's help. =)

                    Comment


                    • #11
                      Originally posted by Taipans View Post
                      I am glad to hear that the settlement in regards to paying those medical bills wouldn't be considered a violation.
                      It would never be a "violation" and would never affect you personally. As I wrote earlier, if the Trustee saw it as a preference then the Trustee is entitled to get the money back from the creditor and then distribute it evenly among the unsecured creditors. That neither affects you personally nor makes that debt non-dischargeable.

                      Originally posted by Taipans View Post
                      Looking around on the net I came across some places (hospitals and such) that attempted to collect on the full amount that they were charged. And / or your insurance company wanting the money back they covered. However it was also noted that it was considered illegal in some cases for them to do that.
                      This would be irrelevant in the case of someone that filed bankruptcy, included those medical bills, and the bills were discharged. Bankruptcy brings finality to discharged debt. Bankruptcy also brings powerful remedies in case some creditor hounds you for discharged bills.
                      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                      Status: (Auto) Discharged and Closed! 5/10
                      Visit My BKForum Blog: justbroke's Blog


                      I am not an attorney. Any advice provided is not legal advice.

                      Comment


                      • #12
                        The only anxiety I have now is being sued at anytime. And then getting the settlement.... I imagine it will be soon. IF I get the money prior to going to court, and prior to filing (I know I would end up having only a few weeks?, I am not sure what time frame that you usually have court date wise) if you would be OK generally in this situation. Especially if you filed before the court date. It's kind of moot at this point as I don't have much control. But thought I might as well ask. My only other thoughts where if I got a large enough one (it wont be enough to pay off fully everyone) I could have an attorney negotiate the balances down. I am not sure how successful that turns out. Although to be honest, for right or wrong I would rather fix things I need and wipe the rest out BK wise (just curious).

                        Comment


                        • #13
                          Bankruptcy is the only thing that completely wipes out debt, brings finality, and brings remedies in case any discharged creditor tries to even phone you about the (discharged) debt. Settlement can work but you must also deal with the tax consequences of settlement (the IRS-1099C is forgiveness of debt and makes the debt taxable). It's a fine line in choosing and some would try to avoid bankruptcy at all costs (because many are uninformed and believe that bankruptcy is a financial death sentence).

                          Even if you get sued soon, the time to be sued and have a judgment takes some time. I would concentrate on the settlement and then the bankruptcy for now.
                          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                          Status: (Auto) Discharged and Closed! 5/10
                          Visit My BKForum Blog: justbroke's Blog


                          I am not an attorney. Any advice provided is not legal advice.

                          Comment


                          • #14
                            OK, I will wipe that idea from my mind. I had a feeling it was probably not a good idea to even deal with. So if I get sued that won't effect the settlement situation, unless of course it ends up having the court system make a judgement. If you get a summons, or a notice about being sued how long can the process take from the day of until actually showing up in court? I only ask for piece of mind in case it happens soon. The settlement of course can take a bit. My PI attorney is sending back a counter offer today and told me it could be 2-3 weeks to here back. I read online that after it's agreed it could take up to 4-6 weeks to be closed out (and I assume the money disbursed). So I am looking at maybe around 2 months until it's over. As mentioned I have not gotten anything yet. BUT two of my creditors are Cap One, and Discover. I hear they are pretty quick and aggressive (and never send to an outside collection company).

                            I really nearly just took the offer yesterday, but my attorney said I was very low-balled. And felt confident that I could end up with much more. But I am really wondering if I screwed up.

                            You have helped so much JB, thank you for taking the time to do so!

                            Comment


                            • #15
                              You don't need to wipe it completely from your mind. In some circumstances, settlement works... just as you're settling an insurance claim, other creditors may settle with you for your debt. The issue is that many are not aware of issues related to settling debt. That includes the 1099-C fro the IRS (making the difference taxable) and the creditor selling the difference to another agency (which comes after you later to collect again). If you have an attorney helping you settle debt, they will usually make sure that the settlement includes no further sale or collection of the debt. The attorney, however, can't remove the 1099-C forgiveness of debt and the forgiven amount is taxable (unless you fit an exception).
                              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                              Status: (Auto) Discharged and Closed! 5/10
                              Visit My BKForum Blog: justbroke's Blog


                              I am not an attorney. Any advice provided is not legal advice.

                              Comment

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