Social Security and Personal Injury in Bankruptcy

If you recall, a major theme of these posts, and bankruptcy in general, is the fact that assets can make a major difference not only in what chapter you file your case in, but the success that the case can have in general. Two major assets, social security cases and personal injury cases, are considered in this same analysis but also treated differently at the same time.

Social security has a couple different angles to it. When we discuss it in the bankruptcy context, we are mostly concerned with social security settlements, i.e., the backpay settlements that are sometimes achieved through the lengthy process with the Social Security Administration. The right to basic monthly payments is not an asset and is only considered somewhat part of the income analysis. The right to receive the backpay settlement is completely exempt from liquidation in the bankruptcy process. The catch here is in the phrase of "right to receive." This language indicates that the right to receive the backpay settlement (which can be thousands and thousands of dollars) is an exempt asset, meaning that filing the bankruptcy while that case is pending and before the backpay settlement is received is the key. If the settlement is received prior to filing, it becomes a full asset and can derail a successful Chapter 7 bankruptcy.

Personal Injury is treated differently in that there is no right to receive protection. Any chance at a personal injury lawsuit, however small, is an asset of the bankruptcy estate. Thus, a trustee can ask if there has been a slip and fall accident and if the debtor is even thinking about suing. That right to suit is an asset. However, while there is no blanket protection via a right to receive language, in Ililnois there is a $15,000 personal injury exemption that protects up to that value in personal injury cases. Thus, it is often part of the 341 Meeting testimony as to where the case is at, how serious it is in nature, and whether there is a chance at recover above and beyond the $15,000.

Regardless, these are two seemingly normal actions in everyday life that can affect the success of your bankruptcy. Therefore, it is crucial to contact an experienced bankruptcy attorney to handle these matters for you.