chapter 7

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.

National Bankruptcy Filings Shift More to Chapter 13

Bankruptcy Law Blog from Ventura Bankruptcy Attorney Andrew S. Mansfield

The American Bankruptcy Institute reports today that Chapter 13 filings constituted 31.5 percent of all consumer cases in October, a slight increase from September.  While the mix between Chapter 7 and Chapter 13 bankruptcies has shifted, overall consumer bankruptcies are declining around the nation.  

“The trend of declining filings has been consistent with consumers continuing to reign in their spending, household debt, and an overall pull back in consumer credit,” said ABI Executive Director Samuel J. Gerdano. “Total consumer filings for 2011 will be less than 2010.”

But why? Some commentators attribute the decline to negative factors.  The lull in foreclosures (soon to pick up again) freed up some cash consumers were committing to mortgages.  Many unemployed are at the tail end of extended unemployment.  Other commentators note that consumers are so discouraged some are simply letting their debts go into default and collection.

Analysis from the New York Times: Double Dip Recession Could Be Much Worse than First

The American Bankruptcy Institute sent the following summary of a New York Times article this morning:

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around, the New York Times reported today. "It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession," said Conrad DeQuadros, senior economist at RDQ Economics. When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policymakers used most of the economic tools at their disposal to combat the last recession and now have few options available. "There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession," said Nigel Gault, chief U.S. economist at IHS Global Insight. "The one precedent you might consider is 1937, when there was also a premature withdrawal of fiscal stimulus, and the economy fell into another recession more painful than the first." There is at least one factor, though, that could make a second downturn feel milder than the first: corporate profits, according to the experts. Corporate profits are at record highs and, adjusted for inflation, were 22 percent greater in the first quarter of this year than they were in the last quarter of 2007.