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Can my workers’ compensation be exempted from bankruptcy?

During a petition in bankruptcy, the court and the bankruptcy trustee will consider the assets that you have declared with an eye toward which of these can be subject to creditor claims for payment of your debts. Particularly in a Chapter 7 liquidation bankruptcy, if an asset is not protected then it can be subject to sale so that the proceeds can be used to pay such claims.

Often bankruptcy happens in connection with a period of unemployment. If the reason for your being unable to work is because of an injury or illness that was work-related, and you are collecting workers’ compensation benefits as a result, this will raise an initial consideration of whether those benefits will be considered to be part of your bankruptcy estate.

If you choose to use the Pennsylvania bankruptcy exemptions, you can remove workers’ compensation benefits from such consideration. This can be the case even if you receive those benefits in a lump sum and use them for another purpose. For example, in a 2015 case a Pennsylvania bankruptcy judge went along with a petitioner’s claim that two land parcels and a car that he purchased in part using such a lump sum workers’ compensation benefits award could still be exempted from the bankruptcy estate despite the bankruptcy trustee’s argument to the contrary.

The question of what assets are exempt from bankruptcy is one that requires careful examination of both federal and Pennsylvania bankruptcy exemptions, which generally speaking are exclusive of each other. Which law to use, and which exemptions you can validly claim, are matters that an attorney experienced with representing clients in bankruptcy situations can help you to decide upon so that your best interests are represented

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