This is a complicated question and each case is different. So, talk to your bankruptcy lawyer or workers’ compensation lawyer for the specific answer in your particular situation. Sadly, while some injured workers are waiting for their case to be resolved or for their settlement money to come in, they are so buried in debt that they have no other choice but to file for Chapter 7 Bankruptcy. I get calls from people in these types of situations who are panicked at the time of settlement because they are concerned they may not even get the settlement money due to having filed for bankruptcy. It’s a really hard situation to find yourself in.
The simple answer is, if your bankruptcy case is completely over, no – the bankruptcy court cannot take your money to pay back your creditors. This is your money to use how you see fit. HOWEVER, the courts CAN take money out of your settlement funds to pay any outstanding debts that are owed for court ordered child support or spousal support.
The Virginia Code statute reads: A. “No claim for compensation under this title shall be assignable. All compensation and claims therefore shall be exempt from all claims of creditors, even if the compensation is used for purchase of shares in a credit union, or deposited into an account with a financial institution or other organization accepting deposits and is thereby commingled with other funds. However, benefits paid in compensation or in compromise of a claim for compensation under this title shall be subject to claims for spousal and child support subject to the same exemptions allowed for earnings in” § 34-29 (See Virginia Code 65.2-531. Assignments of compensation; exemption from creditors’ claims ).
If you would like more information on the Virginia workers’ compensation system, order my book, “The Ultimate Guide to Workers’ Compensation in Virginia”, or call our office today (804) 755-7755.