If you have recently been awarded a lawsuit settlement fund or inherited money you may be wondering how it will affect your Dallas bankruptcy case. The laws about keeping or losing these funds differs between a chapter 7 and chapter 13 bankruptcy. If you are considering or already in a chapter 7 bankruptcy here is what you should know.
When you file for chapter 7 bankruptcy all of your income, wages, funds, and assets become a part of your bankruptcy estate. The estate is what is used to satisfy payments to creditors. However, that isn’t to say you will lose all, or even any, of what is included in your state. How that is determined is through bankruptcy exemption laws.
Lawsuit settlements and inherited funds are just like any other income or fund account in bankruptcy, but are generally not eligible to be protected through exemption laws. Fund accounts like domestic support payments, survivorship benefits, insurance and retirement benefits are exempt in a chapter 7 bankruptcy. Because lawsuit settlements and inherited funds are not typically needed to sustain your living expenses, they are rarely exempt. However, there are exceptions in which either of these funds could possibly be exempt through the wildcard exemption. Another exception where lawsuit settlement funds could be exempt is if they were awarded from a personal injury case.