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Bankruptcy and Georgia workers comp
Bankruptcy exemptions and workers’ comp
Protecting Your Georgia Workers’ Compensation Settlement When You File Chapter 7 Bankruptcy
by Jodi Brenner Ginsberg
Georgia Workers’ Compensation Attorney
Georgia workers’ compensation law blog
Part 2 - When is the Right Time
to File Your Bankruptcy Case
In part one of this series, we discussed the importance of seeking advice from both your bankruptcy lawyer and the lawyer who is representing you in your Georgia workers’ compensation claim. Because workers’ comp claims have settlement value, these claims are considered assets for bankruptcy purposes and you and your bankruptcy lawyer need to be able to make a strong argument that your on-the-job injury claim is an exempt asset, protected from creditors and the Chapter 7 trustee.
My partner, attorney Jonathan Ginsberg, has represented a number of injured claimants in Georgia bankruptcy cases. His experience generally has been that Bankruptcy Judges are usually receptive to the argument that workers’ comp settlements are completely exempt pursuant to the Official Code of Georgia Section 44-13-100(a)(11)(E) which provides an exemption for “the debtor’s right to receive...a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor or any dependent of the debtor.”
Several years ago, Jonathan used this Georgia Code section to successfully argue to a bankruptcy judge that an $85,000 lump sum settlement should be considered totally exempt because those funds would be used to support his client (the debtor) while the debtor recovered from her on-the-job injuries over a three or four year period.
He has used this exemption section to shelter other workers’ comp. settlements.
Jonathan advises that bankruptcy judges tend to focus their inquiry on the “reasonably necessary for support” words of the exemption statute.
Factors that will help your attorney argue that your entire settlement should be considered exempt include:
- a significant injury with full recovery not expected for several years, if at all
- evidence that your post-settlement income potential is greatly reduced from your pre-injury capacity
- evidence in the form of budget projections demonstrating that your settlement will only support you for two or three years
Factors that will hurt your argument that your entire settlement is exempt include:
- evidence that you have returned to work earning close to your pre-accident salary
- your lump sum settlement has been deposited into an investment account and is not being used for day to day support
- evidence suggesting that your settlement was a windfall
Jonathan generally counsels workers’ comp claimants that they are usually better off filing for bankruptcy before settlement is being actively discussed. Since settlement dates and amounts are purely speculative early on in a case and Chapter 7 cases are usually completed within five to six months, trustees and creditors generally will not try to stake a claim if you are injured, unable to work and there is no settlement on the horizon.
In sum, the timing of a bankruptcy filing for a workers’ comp claimant can be very important. Both your bankruptcy lawyer and your workers’ compensation lawyer need to be in communication with one another to minimize your risk if you file for bankruptcy.