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Personal injury settlement exemptions (Missouri)

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  • #31
    Please forgive me if this has already been discussed, but does your settlement count towards income in that six-month window? Is he saying that it will put you over for a chapter 7? Otherwise, I don't understand how he could say that you can't keep a settlement that you would get prior to filing and spend on necessities. This doesn't make any sense to me.

    If this does not count as income, and by the time you file it is already gone on legitimate expenses, then what is the problem? How are they going to get money back from you that is not there? Is he saying they would not approve your chapter 7 because they feel this is dishonest in some way, or you are trying to work the system? Totality of circumstances?

    We had several things in 2017 that we spent on necessities that did not count as income. I guess I just don't see how this is any different. But I am not an expert. I have only been on this forum for a little over a year and this is the first settlement like this I have seen. Will be interested to see what just broke has to say.


    • #32
      And here's the other thing. You *haven't* filed yet. You *aren't* being sued. You may think you are going to be soon -- but the reality is, it could be months. Or more. Who knows?

      You could technically take this settlement & send enough to each creditor to appease them and stretch that timeline out even longer. And this guy is telling you you just "can't" keep it? I call BS. You can do whatever you want to do at this point with that money. It does not sound like he has your best interest in mind.

      Say you file 3 months from now. 6 months, a year. And the subject comes up of this settlement. You have all of the documentation to show all of the responsible places it went. And... what? It's gone. Looking forward, there is no new settlement to come. Your income is what it is. Your financial picture for the next 5 years still looks the same. Are they going to dismiss your case because you spent a settlement on all of the things it *needed* to go to?


      • #33
        Thanks for responding Chrysalis!

        I am not sure about the income situation. It was not mentioned and I did not think to even ask. I brought up the, "what if I spend it and keep track of it" question. And he got a bit weird about it. He kind of paused then advised me it wouldn't be a good idea. And further insisted on waiting as being the safest bet to keep some of it. It really made me depressed as coming out of a Ch7 I won't be able for awhile to get things fixed (like my fence). Put new brakes on my car, catch up on my secured debts etc (since my accounts will be low). I wanted to have a fresh start and be good to go until my wife is working again.

        Anyhow what you say makes sense, I think he was touching off the idea also of it being fraudulent to spend the money prior. But I am not sure if he was ignoring the fact that I wouldn't be paying unsecured debts (or anyone personally back). Or if his advice was centered on "helping" my case to avoid any hangups. I imagine just waiting made things easier for him as well?

        How close to filing did you spend your money?

        Being that my debt is through places like Capital One, Discover etc. I believe someone mentioned they sue fairly quick. I am 5 months away now from my last payments. I also assume when you get sued that's it. A mad rush then happens to get filed. I also am not sure if you spend money during the process leading up to a court date if that's considered fraud somehow?

        I was told not to pay any unsecured debt at this point. I am not sure what enough is considered, or how to break everything down between them? I have gotten "deals" such as if I pay X amount now they will stop it from being delinquent. I wonder if I do that for each, if it could push being sued farther away. Or if when they don't get another payment next month if things speedup.

        Anyhow I am rambling now (sorry). I agree completely with you, the money would be gone. There is no way they could take ghost funds. But could it block me on filing? I need to find out if it adds to my past 6 months of income.

        As usual thank you very much!


        • #34
          To be clear, there is nothing fraudulent about paying your creditors what is due to them.

          What "can" happen is that they may see it as a preferential payment if you decide to pay one or two unsecured creditors a considerable amount right before filing, and you don't pay the rest of them anything. In that case -- as jb has pointed out -- YOU still are not in trouble. It doesn't even affect you. They will simply say to creditor so-and-so: "hey, this guy is filing bk now, you have to give some of that back so we can spread it out".

          You have been told to stop paying unsecured creditors because your plan is to file bk and everyone sees it as just money down the toilet. And honestly, in most cases, it IS. But what if you have to delay filing, what if you just need to keep them from sueing you? What if the amount to keep them off your back for now is WAY way less than what that attorney is saying you "have" to give away? I don't know the answers to these questions. It's your life & your numbers. ;) Just thinking out loud.


          • #35
            It looks like after doing some research that Missouri has opted out of the governments personal injury exemption laws. And now does allow any exemption amount (since 2015). Although as I said this specific attorney said that "deals" could be worked out to allow you to keep some of it (he said 50%). And as mentioned these deals can be approved due to the ... I can't remember trustee? Getting 2,000 dollars out of it.

            Now I am not sure how many states opt out of the Fed laws? But it seems to me it's in regards to keeping the money during and after the filing. And doesn't really mention if the money is no longer attainable. I assume that might be a separate situation that does not have to do with the states exemption laws?

            As far as paying all of the creditors something I could do that. Does it matter how much? I am wondering if the best idea would be to take each of their deals being offered. And toss a bit at some of the accounts not offering anything. The income thing is tough, I can not find anything on it for my state. =(


            • #36
              I don't think it will count as income. It's a one-time thing that won't happen again. I was just trying to figure out what his reasoning was. You should have recorded the conversation so you could share it here. Haha.


              • #37
                If there is one thing I have learned I am not a fan of lawyers (lol). Thanks for all of the help!


                • #38
                  You should also look at your exemptions to see if you can exempt an IRA and how long you have to wait to file after depositing money into it. You could use the settlement to fund last year until April 16 and anytime this year to fund 2018. There’s an untouchable 10k+ savings account that can fund a retirement, a kid’s education, or the next emergency. Yah it’s supposed to be for retirement, but the funds still end really nice at the doc’s office for a cash-up-front-can’t-wait-for insurance surgery. Then if insurance covers, re-deposit as a rollover.


                  • #39
                    Supposedly Sep-IRA is pretty safe. And I get what your saying as a fall back but not really wanting to touch it. However I do not have very much for the exact reason you gave. I ended up taking a lot out due to medical bills for my wife awhile ago. (it never ended up large anyways). Right now there is only 3k inside.

                    Anyhow I am thinking about pulling this settlement trigger today to get that going. I should end up with 20k in my pocket and I do not want to lose it. It seems the consensus on here (well everyone) is to get it and spend it before filing. And their will not be legal repercussions (as long as it's not paid out to unsecured, etc). I have become extremely desperate at this point and I am not prepared to lose it all.

                    I know I keep sounding like a broken record, but I am just trying to do what will help my family the most and keep needing comfort that it's possible (lol).

                    Thanks everyone!


                    • #40
                      I would like to see more people chime in about your latest attorney experience. I'm not sure where everybody went. justbroke You are missed!

                      I also want to make it clear that I personally am not saying "don't pay your unsecured creditors". I am encouraging you that, if you want this settlement to be used for what is needed and what is required (do you have to pay your medical expenses, for example?) -- you should be able to spend this one-time settlement in a responsible manner that won't be viewed as wrong, deceitful, fraudulent, etc. That may include paying some of your unsecured creditors to put distance between this settlement & your filing. Again, I don't know. It's your money and your timeline.


                      • #41
                        Originally posted by Taipans View Post
                        Supposedly Sep-IRA is pretty safe. And I get what your saying as a fall back but not really wanting to touch it. However I do not have very much for the exact reason you gave. I ended up taking a lot out due to medical bills for my wife awhile ago. (it never ended up large anyways). Right now there is only 3k inside.

                        Anyhow I am thinking about pulling this settlement trigger today to get that going. I should end up with 20k in my pocket and I do not want to lose it. It seems the consensus on here (well everyone) is to get it and spend it before filing. And their will not be legal repercussions (as long as it's not paid out to unsecured, etc). I have become extremely desperate at this point and I am not prepared to lose it all.

                        I know I keep sounding like a broken record, but I am just trying to do what will help my family the most and keep needing comfort that it's possible (lol).

                        Thanks everyone!
                        Is this settlement the best that they can do?

                        My suggestion is to put some of the settlement into an IRA so you won't lose it, as long as you follow your state's allowed exemptions. You really should meet with a bankruptcy lawyer for pre-planning. You wouldn't want to pay off an under water car, only to still need to file bk, then have the trustee sell the car to pay to creditors.


                        • #42
                          I meet with a third lawyer on Wed (considering the two so far contradicted each other). My state (MO) sucks on BK exemptions, it seems the state decided people who file need nothing afterwards. I have not brought up the IRA issue, but I have a bad feeling there isn't much hope in protecting some of it. However thank you, I will ask during my meeting this WED. I have a "dire need of fixing" list in place. It does not include paying anything on my vehicles, luckily they both fit into the few exemptions I get (ones even paid off). So, anyhow at this point I have enough legitimate things to spend the settlement on. But putting some away in an accessible IRA sounds like a good safety net. I appreciate the help!


                          • #43
                            There is not a kickback. Some things with the Trustee are just simple negotiations. Neither the Trustee nor the judge "get" money because you made a settlement. The Trustee pays most of the money to the creditors and receives a percentage commission on a declining scale. For example, for $3,000 the Trustee gets 25% ($750). After $5,000 recovered, the Trustee gets only 10% of the amount between $5,000 and $10,000... and so forth declining. For many Trustees this is not a money maker except in cases where there are significant assets to distribute.

                            Most Trustees try to avoid getting into too much litigation where there is potential to waste money and collect nothing. A Chapter 7 (panel) Trustee makes about $60 on each case that has no property to distribute (no asset case). When there is an asset case, the Trustee still must be careful when there is not much there because of the commission. In order to not waste time and resources, the Panel Trustee may "negotiate" amounts when it comes to settlements just to not waste time and money and maximize the amount they get for the creditors. Remember, the panel trustee is the trustee for the bankruptcy estate, but represents the creditors.

                            Wording of a settlement matters extremely in these matters. There is a link below (from a different attorney) that talks about some of the issues. I was worried personally about this but my claim never made it to a settlement or trial but I did significant research on protecting the award or settlement.

                            Last edited by justbroke; 01-17-2018, 08:07 AM.
                            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.


                            • #44
                              So just because my state does not have any settlement exemptions doesn't mean my settlement will be completely taken away? Was the attorney talking about the creditors trustee, and if so are there only a few that deal with every case in the county? If that is the case than it all kind of makes sense.

                              My attorney (well the one attorney) must know the common negotiation amount that's usually reached. Via his comment that it most likely would be 50% (if that's true I guess if I can't settle in time it would be better than nothing).

                              BUT I still have gotten the consensus that I should try and settle prior to filing (for talked about reasons).

                              As I mentioned I meet with one more attorney today, I am hoping this one can help me make a final decision and doesn't come up with some "third" option (lol). Thanks JB!


                              • #45

                                While I have not read all of the responses in this thread I did notice that you have posted similar questions on various forums. Nothing wrong with that.

                                Here is the bottom line:

                                1. If you file Chapter 7 before you obtain the settlement and cannot exempt it, your Chapter 7 Trustee has the absolute right to take every dime. In fact, if the settlement has not been carved in stone, since your Trustee steps into your shoes, he/she can continue to negotiate the terms of the settlement. In a Chapter 7 you lose control over the asset. Period!

                                2. If you file Chapter 7 before you obtain the settlement and the attorney you hire tells you he/she can cut a deal with the Trustee to allow you to keep some of the proceeds, such is quite possible however, there are no guaranties. Your attorney would negotiate with the Trustee. You would come to some agreement. The Trustee would then file a "Motion to Approve Compromise Settlement" under Rule 9019 of the Federal Rules of Bankruptcy Procedure. This Motion would ask your creditors to approve the agreement reached between you and your Trustee. The creditors would then have an opportunity to object to the agreement. Objections are rare but sometimes do happen. If no one objects and the judge signs off, your deal is done.

                                3. If you receive, cash and spend the settlement proceeds (on necessities - keeping track of every dime) before you file, in all likelihood, you will be fine. The question becomes. . . Are you willing to hold off filing bk a sufficient time to legitimately spend the money?

                                4. If the settlement is large enough you can try to avoid bk by attempting to negotiate with your creditors in an effort to settle accounts for some amount less than what is owed. Or, alternatively - if you have enough money, pay off the creditors in full.

                                You have many options. You need to talk to several attorneys to get a feel for what you are comfortable doing.

                                My questions to you (you may have already answered it but. . . ):

                                A. How much do you owe?

                                B. How much will the settlement be?



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