August 19, 2019

How Does Chapter 13 Bankruptcy Affect my Workers’ Compensation Case?

I recently received a question from a gentleman named Charlie who asks:

I filed chapter 13 about 2 years ago, now I got hurt on Job and am receiving W.C.  In the process W.C. is to build a new house for me.  How does chapter 13 come to play?

My husband, Jonathan Ginsberg, has been a bankruptcy lawyer in Atlanta for over 20 years.  I asked him to respond to this question.  Here is his response:

Charlie, first of all, it is important that both your workers’ compensation lawyer and your bankruptcy lawyer know about your accident, the house construction benefit and possible settlement.  Assuming that your weekly wage benefit check is less than your regular salary, you need to make arrangements to keep your Chapter 13 plan current.  Given your injury, your bankruptcy lawyer may be able to amend your plan so that your payment is reduced to account for your reduced income.   Assuming that you foresee a settlement within the next three years, you may be able to make up the difference in a lump sum at settlement.

I have always taken the position that lump sum settlements in workers’ compensation cases may be treated as exempt property purusant to Georgia’s exemption statute.  You should speak to your bankruptcy lawyer about this.  This means that you may be able to keep some or all of your settlement even if your plan is paying only a small percentage back to your unsecured creditors.  In a similar vein, I would argue that the new house should be considered as exempt because it is necessary for your on-going support and maintenance.  Here, too, you need to seek counsel from both your bankruptcy lawyer and your workers’ compensation lawyer.

Finally, you need to advise your workers’ compensation lawyer to file an entry of appearance in bankruptcy court and to file a motion to approve both any settlement and any attorney’s fees claimed.  Bankruptcy judges usually do not have any problem with approving either a settlement or a fee contract, but if you don’t follow the required procedures, there could be delays.