Strategies to Protect and Manage Your Personal Injury Settlement
Personal injury or loss due to negligence on another’s part can lead to emotional, physical, and financial damages for you. In the aftermath of such an incident, loss of earnings and huge debts could incur. In case you are pursuing a personal injury claim through a La Mesa, California attorney or have already collected settlement compensation; it is vital to safeguard those funds for future medical bills, lost income, and various other expenses.
The State of California, the Federal Government, and Your Settlement Award
Personal injury lawyers in California are often asked whether injury victims can collect a garnished injury settlement. Both yes and no are applicable answers to this question. Under state and federal law, individual injury settlement awards are subject to various vulnerabilities and protections.
Similar to most other states, in California, personal injury awards may be garnished for child support arrears and back federal and state taxes owed. Specific factors govern the attachments, and for those reasons, your settlement award may be vulnerable to garnishment.
But with regards to judgment creditors, the state law exempts personal injury settlements from garnishments. It is vital to properly manage your settlement funds to protect them from creditors seeking to garnish money from your bank accounts.
How do Judgment Creditors Take Your Settlement Money?
By garnishing your money, creditors attempt to recover the debts you owe them. Upon filing a lawsuit against you, creditors may be allowed by a court order or judgment to take money directly from your bank accounts for the debts owed.
According to the state law, it is permissible for a creditor to garnish up to an amount that is less of either 25 percent of the debtor’s weekly income or 50 percent of the amount by which the debtor’s income exceeds 40 times the minimum hourly wage.
Four Vital Measures to Prevent Personal Injury Funds from Garnishment
Open a Separate Account
Maintain a designated bank account into which you deposit only your settlement funds. As personal injury awards are exempt from creditor garnishment, it is important to clearly demarcate settlement award money as such. It is not a wise idea to commingle personal award funds with other money.
Maintain Comprehensive Records
In order to trace the origin of your settlement money, detailed records are vital. Maintain organized copies of the settlement agreement and review your bank account statements. Ensure that you retain all deposit and expense receipts related to your settlement award.
Consider Not Using a Bank Account
The use of prepaid credit and debit cards restrict the exposure of your funds to creditors while enabling you to access the money as required. But these cards do have certain drawbacks. Often, high fees are associated with prepaid cards, along with deposit restrictions. You will need to weigh the pros and cons to decide if prepaid cards are a good idea in your circumstance.
Cooperate with your Creditors
If you attempt to avoid creditors, it will only aggravate the situation, and they will aggressively pursue action against you to recover the debts owed. To relieve the stress of further legal action and protect your settlement funds, negotiate a payment schedule with your creditors to pay off your debt. Oftentimes, you can get creditors to agree to accept significantly less than the amount owed as payment in full.
Disclosure of Personal Injury Claims in Bankruptcy
When filing bankruptcy, the debtor must list all assets and property they own. The failure to disclose can comprise bankruptcy fraud, even if unintentional. A personal injury settlement is an asset, similar to tangible assets such as your vehicle, house, and other private property.
The date that the claim arose (which is typically the date you sustained injuries or had the accident) and not the date you filed the claim or collected the settlement or award determines whether it will be included as an asset in your bankruptcy estate. On your bankruptcy petition, you must list your personal injury claim or your potential accident cause if no case has been filed.
Personal Injury Claim Exemption
Simply because you need to list your claim or lawsuit does not automatically mean that you will lose the money if you file bankruptcy. Like all assets, it is critical to understand whether an exemption is available for the protection of the assets.
Under Federal bankruptcy exemptions, up to $25,150 collected as a result of a personal injury claim award of settlement is protected, with certain exceptions. To continue, the following is also protected under federal bankruptcy exemptions:
- Payments you get to compensate you for lost future income, at least to the extent necessary to support you
- Payments you collect due to the wrongful death of specific individuals, to the level necessary to support you
- All payments you are entitled to collect under the reparation law for victims
The amount of exemption doubles for a married couple who file together only if both spouses sustained injuries. Every three years, the exemption amounts are adjusted. The situation is different if you have already won or settled your injury claim and collected funds from it before filing for bankruptcy. In such cases, the funds themselves are the asset and whether you get to retain them depends on whether any associated exemptions are available.
Hire Experienced Attorneys in La Mesa, CA to Maximize your Settlement Award
The chances of a personal injury victim obtaining maximum compensation managing and protecting their settlement monies are much better when they are represented by a skilled and knowledgeable personal injury lawyer. Garmo & Garmo is an established California law firm with a proven track record of success in personal injury cases and several other areas of the law.
Our attorneys have helped countless victims recover full and fair compensation for their injuries. For a no-obligation consultation with a member of our legal team, call today at (619) 441-2500.