How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Ray Your Own Question
Ray, Lawyer
Category: Bankruptcy Law
Satisfied Customers: 41643
Experience:  30 years in civil, probate, real estate, elder law
Type Your Bankruptcy Law Question Here...
Ray is online now
A new question is answered every 9 seconds

Joan wishes to file a Chapter 7 petition in November, 2016.

Customer Question

Joan wishes to file a Chapter 7 petition in November, 2016. Since January, 2016 she has had difficulty paying her bills and mortgage. Her Uncle Bob has helped her by paying mortgage, utility and some credit card bills since January, 2016. In June, 2016 Joan receives a settlement check of $32,000 for a personal injury action commenced in 2014. She has her Uncle Bob deposit it in his account to pay him back for the bills he has paid for her. QUESTION: If Uncle Bob produces bank statements reflecting payments totaling $32,000 to the mortgage, utility and credit card companies, may the Chapter 7 Trustee seek to have the $32,000 recovered from Uncle Bob because it's a preferential payment to an insider, or is there an exception on these facts?
Submitted: 9 months ago.
Category: Bankruptcy Law
Expert:  Ray replied 9 months ago.

Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question and respond.

Expert:  Ray replied 9 months ago.

All personal injury claims are assets just like your car, furniture, and other items of personal property and must be disclosed in your schedules. Failing to disclose an injury sustained before filing may lead to the loss of any recovery to which you might be entitled. Even if the failure to disclose is unintentional, it may not save your claim. If Joan here discloses the recovery it should not be a problem.She may have to answer questions about it, but she can document the bills that Uncle Bob paid on her behalf it should not be a problem.Not disclosing it here would be the problem.If she does that it is her money , the repayment to Bob is proper since it is her money and was reported in the filing.

Expert:  Ray replied 9 months ago.

NY bankruptcy law would allow you to have the recovery if you just report it on your filing.

Customer: replied 9 months ago.

The article from the link you posted cites the P.I. exemption of $23,675 in Pennsylvania. In NYC I believe the P.I. exemption is the first $7,500. Is that right? The article also states that a Debtor can "stack" exemptions by using the balance of a homestead exemption to exempt the P.I. award. Never heard of that one! In NYC, which is the case here, the homestead exemption is $150K. Debtor has $73K in equity in her home. Does this mean that she can invoke the balance of her unused homestead exemption against the P.I. award of $32K?

Expert:  Ray replied 9 months ago.

New York state law2 saves bankruptcy filers from losing all of their valued property by providing a number of exemptions from liquidation. For example, you may keep a certain amount of equity in your home or car, certain personal property, insurance benefits, and more. One exemption addresses any personal injury recoveries that you may have received in a separate case.

The law allows you to keep up to $7,500 of a personal injury award that was meant to compensate financial losses. The exemption does not allow you to keep any personal injury recoveries that were meant to reimburse you for intangible losses, such as pain and suffering. If your injuries were relatively minor, chances are that your award was less than $7,500 and you will be able to hold on to that money.

And thats correct you can try and use the balance of the homestead exemption here to stack them and shelter more of the recovery.This may be your best option here based on your situation.

Expert:  Ray replied 9 months ago.

Here are a few things you need to know about personal injury settlements in a New York bankruptcy:

  • Federal exemptions protect up to $20,200 in personal injury claims, but they exclude noneconomic damages, e.g. pain and suffering. However, economic damages such as medical expenses and lost wages are covered.
  • Also under the federal exemptions, up to $21,625 in a “wild card” exemption can be applied to a personal injury settlement.
  • New York has its own personal injury exemption up to $7,500, but this also excludes pain and suffering. The federal and state exemptions cannot both be used, so the settlement is better protected under the federal exemptions.
  • In theory personal injury settlements can be further protected in Chapter 7 proceedings if the creditors fail to file their “proof of claims” with the bankruptcy court before the deadline. If this happens, then they waive their rights to collect on non-exempt debts like the balance of a personal injury claim above the exempted amount.

Federal exemptions might be better for her, she should ue bankruptcy lawyer to make sure which are better for her here to protect her assets.

Customer: replied 9 months ago.

Unfortunately, she has $75K in equity in her house, so she has to invoke the state exemption. But, your last comment, "you can try and use the homestead exemption to stack...." Is that applicable if she invokes state exemption?

Expert:  Ray replied 9 months ago.

Yes it is , I think this would allow her to shelter it under the state exemptions rather than federal here.

Thanks again.

Expert:  Ray replied 9 months ago.

If you can positive rate 5 stars it is much appreciated.

Related Bankruptcy Law Questions