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Personal Injury & Workers’ Compensation in Bankruptcy

TO: Attorney Theresa Rose DeGray

FROM: Victoria Estreicher, Paralegal Intern & Guest Blogger

DATE: March 14, 2018

QUESTION OF LAW: Can you keep your personal injury or workers’ compensation settlement safe when filing bankruptcy in the state of Connecticut?


DISCUSSION: After you receive a settlement from either worker’s compensation or from a personal injury claim, you may be eager to know if you can still keep that money when you are filing for bankruptcy. There is no direct answer because it depends on a wide range of factors. Settlement money is seen as a type of personal property just like your car, your home, or your jewelry. If you happen to receive money from a workers’ compensation settlement after filing for bankruptcy, you can keep that money depending on the type of settlement you received, when your claim or cause of action arose, the exemption laws in your home state, and whether you filed for either Chapter 7 or Chapter 13 Bankruptcy. If you filed for Chapter 7 bankruptcy, almost all of the property that you own can become property of the bankruptcy estate. Unless you can fully exempt an asset, the trustee can sell it to pay off your creditors. You must be very careful when filing for Chapter 7 Bankruptcy because if you do not disclose your settlement to the court, then you are at risk for that money to be taken away from you. It is critical to disclose all of this information when you file a petition to the court for bankruptcy. If you do not disclose this information, you can suffer significant consequences such as not receiving your discharge (dischargeable debts are obligations that can be wiped out by your bankruptcy discharge). You can even put yourself at risk for being charged with fraud and if convicted you can either be fined, sentenced to jail time, or both. Your workers compensation claim may be exempt from bankruptcy depending on where you live because it varies from state to state. Connecticut happens to be one of the states that has an exemption. You will not lose everything when filing for bankruptcy in the State of Connecticut, you have a choice between the federal exemptions or Connecticut’s own exemptions. Be aware that you can only choose one, you may not choose from both lists. Under Connecticut General Statutes §52-352b your worker’s compensation benefits will be protected. Any type of injury claim should also be disclosed when filing for bankruptcy even if you haven’t decided to pursue the claim yet. There is also a wildcard exemption that can be used to claim an exemption to your potential personal injury settlement but it is dependent on how much wildcard there is available. The wildcard allows you to keep assets or property that are not typicall or texty exempt under Chapter 7 bankruptcy exemptions. The current federal wildcard exemption is $13,100.00. When filing for Chapter 7, you must disclose the personal injury case to the bankruptcy court and trustee. Ultimately, you should have this conversation with an attorney in order to determine which set of exemptions, will best suit you to meet your specific goals or financial needs. If you would like to set up a free consultation with Attorney DeGray to discuss your case, please click HERE. Thank you.