How does filing Chapter 13 affect a workers compensation settlement?

[anonymous]

If your income is workers' compensation and possibly a settlement is going to be proposed. Filing chapter 13 will that be taken away?

[Bankruptcy Helper]

At the federal level, workers’ compensation claim benefits are considered exempt property. “Exempt property” is a bankruptcy term that refers to property that cannot be liquidated by a bankruptcy court or trustee as a part of a bankruptcy. This means that in general payments you receive as a part of a workers’ compensation claim—whether recurring payments or a lump sum payment—will be yours to keep, even if you receive the payments while in the midst of the bankruptcy.

However, the final disposition of workers’ compensation claim benefits is not this clear cut in all situations. While the federal bankruptcy code defines workers’ compensation benefits as exempt property, each state has the choice to opt out of the exemptions provided by the federal bankruptcy laws. Therefore, some states have created their own list of exemptions and allow you to choose the exemptions—either the federal or state exemptions, but not both—that work best for your situation. The remaining states have created their own list of exemptions and require that you use the state exemptions, not the federal exemptions. Therefore, it is a wise idea to consult a bankruptcy attorney to confirm which exemptions are permitted in your state.

One final note: If you previously filed a Chapter 13 bankruptcy and are currently making payments related to the bankruptcy restructuring plan, you need to let your bankruptcy attorney as well as your workers’ compensation attorney know about your injury. If you receive less income from your workers’ compensating claim than you did while working, you may need to work with your bankruptcy attorney to restructure your Chapter 13 payment plan based on your new income level while you recover from injury.