A personal injury settlement is regarded as an asset and needs to be revealed in bankruptcy court. If you don’t reveal it, the money might be given to your creditors. The court takes asset concealment very seriously. If you have experienced bankruptcy, you may still have a personal injury settlement. In this article, we have jotted down five points as suggested by an injury attorney about how a personal injury settlement affects your bankruptcy. Here we go! 

Effects of personal injury settlement on bankruptcy 

1. Effect on Bankruptcy Estate

All assets of the debtor, such as prospective litigation claims like those for personal injuries. All these are included in the bankruptcy estate. The amount of a personal injury settlement you obtain before declaring bankruptcy may be included in your bankruptcy estate and used to settle debts owed to creditors.

2. Exemption Laws

Some assets are not included in the bankruptcy estate. You must speak with a bankruptcy attorney to determine whether the exemption laws apply to your particular circumstances.

3. Settlement Timing

The timing of a personal injury settlement in connection with the bankruptcy filing may also impact the outcome. The money from a settlement you get before declaring bankruptcy could have to be included as assets in your petition. Nevertheless, the settlement can still be regarded as a component of the bankruptcy estate if it is received after declaring bankruptcy but before the case is dismissed.

4. Disposable Income 

Debtors use a court-approved repayment plan to settle their obligations. If you get personal injury compensation, the repayment plan terms may change. This is because the settlement sum can be viewed as discretionary income. You would need to spend some of the settlement money to make larger payments to your creditors.

5. Proper Reporting and Disclosure

During bankruptcy proceedings, you must report and disclose any settlements for personal injuries. Withholding information about a settlement or prospective claim could be interpreted as bankruptcy fraud. It carries substantial repercussions, including the dismissal of your bankruptcy case or criminal prosecution.

Wrapping up 

These are some significant ways in which a personal injury settlement can largely impact your bankruptcy. In such a situation, you must immediately hire a lawyer to overview your case and suggest solutions.