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Personal Bankruptcy and Georgia Workers Compensation
Workers Compensation claims can complicate your bankruptcy options, regardless of which case came first. It goes without saying that your two lawyers need to be notified about the other so they can coordinate their respective efforts. Here are several common scenarios and some thoughts about how to proceed:
You have already filed your Georgia workers’ compensation case and now you need to file for bankruptcy.
Chapter 7 bankruptcy - a Chapter 7 bankruptcy is designed to eliminate unsecured debt like credit cards and medical bills. To a Chapter 7 trustee, your workers’ compensation case will be seen as a possible source of cash (the settlement value of your case) and your status as a claimant may be seen as a temporary deviation from your regular, full salary employment. Your Chapter 7 bankruptcy lawyer will want to know how long you are likely to be on temporary total disability benefits and he will want some idea of the settlement value of your case. Generally, your bankruptcy attorney can protect your settlement by declaring the settlement as an exempt asset, but every case is different.
Chapter 13 bankruptcy - a Chapter 13 bankruptcy case is a payment plan in which you pay your creditors over a three to five year period. Your weekly wage workers comp benefits can serve as a source of “regular income” that can be used to fund your plan. However, when your case settles, your bankruptcy lawyer will need to file a motion to have your settlement approved and your comp lawyer will need to file a motion to have his fees approved. Often the Chapter 13 trustee will want you to send some of your settlement to the trustee as a plan contribution and when you return to work you will need to modify your plan and petition to reveal your new budget and updated plan payment.
You are in the middle of your bankruptcy and you get hurt on the job
Chapter 7 bankruptcy - usually an on-the-job injury will result in less household income. A reduction in income can change your options regarding the reaffirmation of secured debts. Generally the Bankruptcy Court will not let you reaffirm (keep) secured debts for a car or a house if you don’t have enough disposable income to afford those items. A budget change in the middle of your Chapter 7 case can create issues that your bankruptcy lawyer will need to address.
Chapter 13 bankruptcy - as is the case with Chapter 7, your on-the-job injury will usually result in a reduction of your household income. As such, the disposable income in your budget may decrease meaning that your plan payment may become unmanageable. Here, too, a good bankruptcy lawyer can help navigate these difficult waters. You may be able to modify your plan to temporarily reduce your payment, although you may have to commit to sending some of your settlement money to the trustee.
Procedures for dealing with bankruptcy and worker’s compensation will differ depending on where you live. Georgia, for example has three bankruptcy districts - the Northern District (Atlanta, Rome, Newnan), the Middle District (Columbus, Macon, Athens) and the Southern District (Valdosta, Savannah). Each of these bankruptcy districts has different procedures. If you live outside of Georgia, the practices and procedures described above may be very different and when you are looking for a bankruptcy lawyer make sure to ask about his or her experience in workers’ compensation matters. Attorney Steve Otto has written a helpful overview of the workers’ comp/bankruptcy issue from the perspective of a bankruptcy lawyer - see his post on the Bankruptcy Law Network site.
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