After an accident, the settlement amount you obtain can help you pay for hospital bills and other related expenses. Clients, who owe debts, often wonder if their compensation can be subject to garnishment actions at the hands of creditors. Fortunately, under New York State law, personal injury settlements are partially exempt from the reach of most creditors. In other words, creditors are typically prohibited from seizing settlements to satisfy existing debts.
Protecting Your Compensation
If you declare a Chapter 7 bankruptcy, all non-exempt assets are eligible to be distributed for the payment of creditors in return for discharging unpaid debts. Individuals filing for bankruptcy can choose to apply for either New York State or federal bankruptcy exemptions. Typically, federal exemptions provide more generous guidelines than those within the state. Some important exemptions include:
- Federal law permits exemptions of up to $25,180 for personal injury settlements. However, this only applies to compensation awarded for economic damages, such as lost wages and medical expenses.
- Under federal law, a wildcard exemption of $13,900 can be utilized to protect the debtor’s non-exempt assets.
- New York State law provides an exemption of up to $8,500 of personal injury compensation, which applies to bodily injury.
Maintaining Your Settlement Funds Separately
It is crucial to keep your settlement separate from other funds that you hold, especially non-exempt money, to protect it. For instance, paychecks and other income are usually non-exempt. Suppose your direct deposit from work goes into the same checking account that maintains your settlement funds. In that case, it could be viewed as the commingling of exempt and non-exempt monies. Creditors often try to claim that commingled money should lose its exempt status. Therefore, the easiest way to avoid commingling is to place your settlement in a savings account and avoid depositing any other funds in it.
Discuss Your Case With A Veteran Buffalo, New York Personal Injury Attorney
Suppose you, or someone that you care about, have been seriously injured in an accident, you may be entitled to pursue compensation for your past and future medical expenses, lost wages, pain and suffering, permanent disfigurement, life-long disability, loss of consortium, diminished future earning capacity, and much more. Jed Dietrich, Esq., highly praised as an American Institute of Personal Injury Attorneys 10 Best Attorneys, and his battle-tested personal injury lawyers aggressively negotiate to get the highest possible settlements for our clients. We want to ensure that you can keep as much of your compensation as possible. Contact the Dietrich Law Firm P.C.’s outstanding attorneys today for your free consultation. We are available twenty-four-seven at 716-839-3939 or by completing the online consultation form.