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Personal injury settlement exemptions (Missouri)

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  • #16
    That sounds pretty complicated and the tax situation really horrible. I guess my worst case scenario at this point is that I might have to file before the settlement is over and just lose it. Luckily I didn't know if I would get back any excess after the attorneys share and the medical bills. So I already had that outcome in mind. But ya I have heard that even if you make a "deal" with creditors they can still come after you later. The protection of the courts feels much more secure for me.


    • #17
      Debt settlement is not impossible. It just needs to be done carefully and the debtor must consider the tax consequences. The debtor must also make sure they have a settlement agreement in a writing that precludes the creditor from reselling the deficiency (difference between settlement amount and amount owed).
      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.


      • #18
        OK, so an attorney can set that up to be taken care and an avoid future collections? What type of an attorney would you use for that?


        • #19
          Debt settlement attorney although many bankruptcy attorneys and personal injury attorney may practice in the area of debt settlement.
          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.


          • #20
            Thank you very much for all of the help JB!


            • #21
              Originally posted by bcohen View Post
              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.
              I had a few followup questions in regards to your response if that's OK.

              I was doing a bit of digging around on this topic, and the information is extremely vague. But I did find a post that said the ONLY thing a settlement could be used for is necessities. But I can not figure out what is considered a necessity. I also obviously would like to spend the settlement before filing, but the things I would like to spend the money on are mostly house repair related. Do you have any idea what you can and cannot use it for?

              Secondly, I also read that the money needed to be long gone prior to filing. But once again "long gone" wasn't expanded upon. I will not have much time between receiving the settlement and filing, at least I believe. I know these questions need to be directed at a BK attorney (and I will be). But I just wanted to see if you had any insight on this for peace of mind.

              Thank you!


              • #22
                If it is any help to you, we had to spend our kids' savings accounts (in our names) as well as the cash value on their whole life insurance, prior to filing. I don't have an exact figure just off the top of my head, but I'm going to say this amounted to around $13,000 in the months leading up to bk. That might sound like a lot -- but we spent it in a spread-out, as-needed manner, so it didn't *feel* like a big chunk all at once to me.

                Medical bills for my husband's back problems, stocking up on groceries, some clothes and shoes, and paying our bills. We bought a new microwave and freezer -- under $400 for both. We "splurged" and spent $100 for a porch swing, knowing how much time would be spent at home... just observing our driveway. Lol. We bought a new lawnmower and weedwacker -- again, maybe $400-500 for the two together. These are things that come to mind right now. Necessities... just think to yourself, "do we need this?" "Are we going to need this in the next few years when we possibly have NO credit to fall back on?"

                I kept receipts for every penny spent. I took that fat envelope to every meeting. Guess what? No one asked. No one cared. I felt better knowing that each decision to spend was justified and accounted for -- but in the end, it just didn't matter.


                • #23
                  You could use settlement money for anything (period). The question "may" arise if you used settlement money, on the eve of filing bankruptcy, to do questionable things; such as uncontrolled gambling or other frivolous spending. That's "if" the Trustee thinks that you squandered the money knowing that you filed and that your bankruptcy was filed in "bad faith." The issue of bad faith doesn't come up often (less than 5% of cases... maybe).

                  The reason that we say use it on necessities, if you're filing just after receiving the settlement, is that no one would question you living. Most of the bankruptcy code points to "luxury" goods, purchases and services and suggests someone that is not deserving of a discharge because they didn't pay their creditors. As I said before, even if you took the settlement and paid unsecured creditors, the worst the Truste could do to you personally... is nothing. The Trustee, if they so choose, decided that one creditor was "preferred" over the other -- known as a preference -- then the Trustee could choose to "claw back" that money from that specific creditor or creditors and then divide it among all the creditors. That's simply not your issue.

                  Necessities: medical care (non-cosmetic), mortgage, rent, heat, water, food, clothing (not from Neiman Marcus, of course), dental care (non-cosmetic), personal grooming, gasoline for car, car repairs, home repairs, maintenance costs, childcare expenses, support of elderly parents, bankruptcy attorney, personal injury attorney, and anything similar. Necessity simply means necessary to live and/or earn income.

                  Not a necessity: gambling, exotic vacations, exotic sports car purchase, most preference payments, etc.

                  I would stop worrying about this.
                  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.


                  • #24
                    Thanks for responding Chrysalis!

                    I will (or should) be getting back a bit more, prob 25k at most. If I ended up with much more (who knows) I would probably hire an attorney that negotiates debt and just pay them off. But I have much more debt (55k). I know this is off topic, but I have heard you can sometimes get companies to drop it to half the original amount.

                    Anyways, we do have a lot of things we need around our home. Broken fence, hot water heater, stove, plumbing fixed etc. BUT most of these things would be pretty expensive. It seems though like it might be OK however by your experience. How close did you buy all of those things in regards to filing? Oh ya, I also need to catch up my secured debt, I fell almost 30 days behind on some, I wonder if that would raise any issues. And my filing fee's of course. (first response mentioned though as long as it wasn't unsecured it should be fine).

                    I planned on keeping receipts and notes on each (why's). I figured like you that would be the best thing to do. My main concern right now is IF I could take care of all of my issues close to the actual filing date. As you mentioned going into a plan (possibly ch13) I don't want to have known things not fixed going through it.

                    Thanks again!

                    EDIT: Thanks JB! I am really sorry to everyone freaking out on here. I did setup an appointment with a new lawyer for next Wed. I just didn't sleep last night and have felt sick with worry this morning.


                    • #25
                      Don't be sorry. Seriously. We have ALL been there with the stress & nerves ... some of us more than others. ;)

                      This is a very stressful time. We are just trying to help you sort out what to stress about and what not to. It is SO much easier to be calm "on the other side" of this whole mess.

                      I forgot to mention, we also received a nice tax refund in February 2017. Close to $9000. At the time, we were still trying to *not file bk* -- this was delusional, of course. So I was still paying minimums on credit cards at that time. I also paid off our Lowes card which was about $600 because we had JUST used it to install a new shower. I don't even remember where the rest of that money went (it's all on my speadsheets) -- I just know that we spent on things that we considered necessities knowing in the back of our minds that we were probably going to end up filing at some point. No one questioned us about our tax refund or where it went... well, maybe our attorney did. But I do not remember the trustee asking. And we filed in July.

                      Spending the kids money was the hardest part, and it was all done in the few months before we filed. I will never forget lady in the red commented to one of my posts and told me that I wanted to start making smart financial decisions, and sending my kids money to credit cards did not seem to be a smart move. That is when we stopped paying the credit cards and really started focusing on what do we need? Man, I wish we had done that sooner.

                      Home repairs are a necessity. If you have things that are going to need done, do them. Our bedroom and one of our sons bedrooms still has concrete slab as a floor. Old, 1967 cracked concrete slab. We removed the carpet due to mold issues and now we do not have the money to replace it with anything. Sure, we can live with it. We are living with it. But we didn't HAVE to. Our water heater is still a rental... we've been renting for almost 15 years now @ $20/month. Do the math on that! Geez.

                      We did not do a 13 -- ours was a 7. The planning still needs to be the same. You really have to look at *living within your means* for years to come -- ideally, forever! So whatever is needed that doesn't fit into that picture, better deal with it now, while you have the means to do so.


                      • #26
                        Originally posted by Taipans View Post
                        Thanks JB! I am really sorry to everyone freaking out on here. I did setup an appointment with a new lawyer for next Wed. I just didn't sleep last night and have felt sick with worry this morning.
                        I know that you are worried and we are worried that you are worried. I would really like to come on here tomorrow and read a post, from you, that says that you had a good night's rest. These are easy issues to address and, as I wrote, even if you took the money and paid an unsecured creditor, it's still not your issue.

                        I hope that the attorneys, with whom you consult, will help put your mind at ease. From our viewpoint, we see these as not major issues at all. They just require planning and assistance from your attorney. Interestingly, I was worried about my case and had some anxiety, but just thinking it through and posting here on BKforum helped to put my mind at ease. I guess I'm saying that I understand how you are feeling because I was in that position as well. Fear of the unknown can be exhausting.

                        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.


                        • #27
                          Thank you to everyone. I don't know what I would do without this place. I am pretty shocked on how informative and nice everyone is. And it's a great resource to have going in knowing that I can get piece of mind. I know 99% of these questions need to be addressed by an attorney, but life experiences speak volumes and I appreciate that. As far as my attorney, the first one I met with (last August) "seemed" decent enough. But he never returns my calls or emails..... it's so bizarre. Luckily I am meeting with a second next Wed. And due to everyone's responses here I can have a better weekend.



                          • #28
                            Originally posted by Taipans View Post
                            As far as my attorney, the first one I met with (last August) "seemed" decent enough. But he never returns my calls or emails..... it's so bizarre.
                            For attorneys... money talks. The corollary is also true; a signed services agreement and retainer also "speak" to an attorney's sense of urgency. (Some legal humor for you to brighten your day.)
                            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.


                            • #29
                              Originally posted by justbroke View Post
                              For attorneys... money talks. The corollary is also true; a signed services agreement and retainer also "speak" to an attorney's sense of urgency. (Some legal humor for you to brighten your day.)
                              I am not sure what I signed... that just freaked me out. LOL. Thanks. =) He had us sign something last summer but we didn't pay anything. I felt like I wasn't under obligation legally though... I need to find it. I don't want to use him at this point. I am probably once again a bit nervous over nothing. But that situation just crossed my mind. =)


                              • #30
                                I spoke with a second Attorney yesterday and he didn't tell me what I was expecting to hear. I was hoping for some more input if you guys wouldn't mind. Anyhow he told me that I couldn't keep the settlement if I got it "before" filing. And then he told me if I filed before the settlement was over that he might be able to work out a deal for me to keep some of it with the trustee (guess that's who it was). His reasoning was that the person (trustee?, judge?) who approves it will get a few thousand themselves. So they usually are happy with making a deal. He mentioned the norm around here was 50% or so, and he knew the two guys who took care of this stuff. I can't remember if these "guys" were trustees? And went on to mention that they would push everything through smoothly. (he even was going to give one of the guys a call just to see what they "could" offer).

                                NOW, this sounded shady, it felt almost as a bribe. If I go with filing before the settlement, these people will get a kickback and they probably would pass me through without incident. He also stretched out the amount of home equity that would be approved, due to them being very lax (his words: grumpy old men who were close to retirement).

                                Which means it felt like I could go through a Ch7 pretty painlessly. And with "bribe" money end up with some of my settlement, and have much more... umm, loyalty of the trustees (what is this the mob).

                                On the other hand I felt like I was being scammed / tricked out of a lot of money. I believe at first he assumed that I would loose everything if I had it in the bank (which I know). But I wouldn't have it at that point via making sure it was "morally" gone prior. When I mentioned some of what you guys said "spending it on living necessities, no unsecured creditors or friends". As well as keeping receipts and tracking what and why I spent it on. He kind of did one of those wavy hand movements and reacted like it was an iffy idea (it was odd). Like it might've been OK, but he didn't advise it (kick backs?).

                                This leads me to a crossroad... I want this to go smoothly. I would love to have the final decision makers on my side. And I might be willing to pay mob money (sigh) to do it. BUT I don't want to be tricked out of thousands, and I need the money prior to filing so I can not only catch up on secured debt. But fix everything in disrepair around my house, and well... pay the attorney.

                                This was attorney number 2, however the first one was back in august and I can never get a hold of him. So he is off the table. I am getting a bit annoyed by all of this and wanted to see what you guys think. I apologize this is such a long post, but I am a bit anxious at the moment. Oh and happy Friday!


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