A Tennessee debtor who is currently making payments under a court-confirmed Chapter 13 bankruptcy plan would need to modify the terms if new income enters his or her financial picture. Under such circumstances, the bankruptcy court would review the new information and possibly adjust the payment schedule. Funds received after a personal injury settlement would not necessarily be off limits to creditors.
In early August, a federal bankruptcy judge ruled on just such a case and affirmed the right of creditors to access funds from a car accident settlement awarded to the victim. The man had been making payments for three years when a car crash injured him. After paying court and attorney fees, he collected $74,067. Because the judge deemed the settlement to be part of the debtor’s estate, the creditors then had a right to the funds before the man who had been in the car accident.
The debtor claimed that his ongoing medical bills and living expenses should give him a right to the full settlement. Although a bankruptcy court is allowed to consider those needs, the court issued a statement saying that the man in that case did not present any evidence about the financial needs pertaining to his injury.
When a person qualifies for bankruptcy protection under Chapter 13, the court will approve a payment plan that spans three to five years. The assistance of an attorney might help a person to establish manageable payments. An attorney could document the person’s living expenses along with other obligations like taxes and child support. The information could be presented to the court during negotiations with creditors. The effort might convince a judge to approve a plan that gives the person enough breathing room to achieve a fresh financial start.