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i filed a ch. 7 bankruptcy in 2011 in texas and recently i

was awarded some money through...
i filed a ch. 7 bankruptcy in 2011 in texas and recently i was awarded some money through a lawsuit can my money be taken to pay my debts
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2/3/2013
JoeLawyer
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
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It depends on when the facts and circumstances giving rise to the lawsuit occurred, and what type of lawsuit it was.

If the facts and circumstances giving rise to the lawsuit occurred BEFORE the debtor's Chapter 7 case was originally filed, then technically the money the debtor recovered from the lawsuit is supposed to be reported to the Bankruptcy Court, and the trustee would likely take the funds to give to creditors UNLESS those funds happen to be exempt (i.e. protected by state law) for some reason, such as if they are workman's comp, social security, etc (and this depends on state law and varies from state to state). But, in most types of cases, if the events giving rise to the lawsuit happened before the bankruptcy was filed, the debtor will have to give the funds to the trustee to distribute to creditors.

If the facts and circumstances giving rise to the lawsuit occurred AFTER the Chapter 7 was originally filed, then most likely the money cannot be taken from the debtor to give to creditors UNLESS the facts and circumstances giving rise to the lawsuit occurred within 180 days after the bankruptcy case was originally filed AND are either for inheritance, property settlement agreement with a spouse in a divorce, or life insurance (see 11 U.S.C. 541, HERE).

For example, if the debtor was injured in an automobile accident in 2010, filed Chapter 7 in 2011, and got money from a lawsuit regarding the accident in 2013, then that money would have to be turned over to the Bankruptcy Court since the accident occurred before the bankruptcy was filed.

In another example, if the debtor files Chapter 7 on January 1, 2011, then is injured in an automobile accident on January 2, 2011, the debtor will get to keep his or her lawsuit proceeds since the accident occurred after the bankruptcy was filed.

In another example, if the debtor files Chapter 7 on January 1, 2011, and then his or her mother passes away on May 15, 2011 (i.e. within 180 days after the Chapter 7 was filed), then anything the debtor inherits will have to be turned over to the bankruptcy trustee since inheritance is one of the three types of funds that the court can go after up to 180 days after a case is filed (with the other two types of funds being property settlements in divorce and life insurance).

In a final example, let's say the debtor is injured at work on January 1, 2011 and files bankruptcy on January 2, 2011. The debtor then recovers a workman's comp lawsuit settlement of $10,000 in February 2011. The debtor would get to keep the $10,000 even though the accident occurred before the bankruptcy was filed since the state in which the debtor filed bankruptcy has a law that says workman's comp claims are safe (exempt) in bankruptcy.

You should discuss the lawsuit with your bankruptcy attorney to see if you are required to report it to the Bankruptcy Court.

Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.
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Experience: Attorney in the practice of Bankruptcy Law since 1996
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