Concussion Settlements in Consumer Bankruptcy Cases

If you obtain a settlement after filing a personal injury lawsuit, is that settlement protected in consumer bankruptcy? Under the U.S. Bankruptcy Code, settlements are considered to be a type of property. Accordingly, if you are filing for Chapter 7 bankruptcy, any money you obtain from a settlement is going to be considered property of the estate and subject to liquidation unless it is exempt. We want to explain more about personal injury settlements and discuss a recent case concerning an NFL player’s settlement for brain damage and chronic traumatic encephalopathy (CTE) as a result of sustaining concussions while playing football. The recent case suggests that bankruptcy courts may be open to expanding personal injury settlement exemptions in certain cases.

How Personal Injury Settlements can Qualify for an Exemption in Illinois
Exemptions allow a debtor to retain certain property in the event of bankruptcy. This means that any exempt property will not be liquidated in order to repay creditors. There are a variety of exemptions, from a homestead exemption allowing debtors to retain a certain amount of equity in a home to exemptions for retirement accounts and pensions. If you file for Chapter 7 bankruptcy in Illinois, you will need to use the Illinois exemptions,. While some states allow a debtor to choose between federal exemptions and state exemptions, a bankruptcy case in Illinois requires the use of Illinois exemptions. Those are found under the Illinois Code of Civil Procedure.

There is no specific exemption for a personal injury settlement under Illinois law. Instead, an Oak Park resident who files for bankruptcy can use the “personal property” exemption to exempt up to $15,000 from a personal injury recovery, including a settlement. Then, an Oak Park resident could also use the “wildcard” exemption to exempt an additional $4,000 of personal property. The “wildcard” exemption cannot be used for real estate or wages, but it can be used for most other types of property.

However, it is important to note that using the full amount of the “wildcard” exemption for a personal injury settlement means that you cannot use that for any other property. In addition, the “personal property” exemption would not protect your personal injury settlement beyond $15,000. As such, if you received $75,000 in a concussion settlement, only $15,000 would be exempt if you rely on the “personal property” exemption, and the remaining $60,000 would become part of the bankruptcy estate.

Concussion Settlements for NFL Players
Does the same logic we just described above apply to NFL players who have received concussion settlements and ultimately may need to file for bankruptcy? In the recent case, the court determined that an NFL concussion settlement was not a personal injury recovery for purposes of bankruptcy, but instead was a disability benefit.

Disability benefits are exempt in bankruptcy proceedings. As such, classifying a concussion settlement as a disability benefit instead of a personal injury recovery means that the exempt amount would not be capped by the exemptions for the state where the bankruptcy occurred. This decision ultimately could have effects on bankruptcy cases in Illinois and in other parts of the U.S. where NFL players obtain concussion settlements. It is possible that similar reasoning could extend to other settlements concerning traumatic brain injuries.

Contact an Oak Park Bankruptcy Lawyer
If you want more information about bankruptcy exemptions in Illinois, a dedicated Oak Park consumer bankruptcy lawyer can assist you. Contact the Emerson Law Firm for more information.


See Related Blog Posts:

FDCPA and Foreclosure: Update on the Obduskey Case at the U.S. Supreme Court

Mistakes to Avoid When Taking the Chapter 7 Bankruptcy Means Test: Part I


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