Worker's Compensation and Bankruptcy

Is a worker's compensation claim exempt in bankruptcy?  This question sometimes arises when a client has a claim and they simply don't know if it will be granted and, if it is, how much the award might be.  Could one lose it by filing Chapter 7?

The answer is "no."

The California Code of Civil Procedure, Section 703.140 governs claims of exemption between creditors and debtors in bankruptcy.

The relevant parts of Section 703.140 are as follows:

“(a) In a case under Title II of the United States Code all of the exemptions provided by this chapter, including the homestead exemption, other than the provisions of subdivision (b) are applicable regardless of whether there is a money judgment against the debtor, or whether a money judgment is being enforced by execution sale, or any other procedure, but the exemptions provided by subdivision b may be elected in lieu of all other exemptions provided by this chapter, as follows:

(b) The following exemptions may be elected as provided in subdivision (a):

. ..

(10) The debtor’s right to receive any of the following:

(A) A social security benefit, unemployment compensation, or a local public assistance benefit.

(B) A veteran’s benefit

(C) A disability, illness of unemployment benefit”

Therefore, Workers’ Compensation benefits are usually not considered a asset of the debtor who has filed for bankruptcy protection under a Chapter 7 liquidation proceeding.

As with all blog entries on this website, the information above is not legal advice on your particular case and it does create an attorney-client relationship with our offices.  You should consult counsel on your particular case.