Workers’ Compensation and Bankruptcy

If you file for bankruptcy, what are the ramifications if you have a pending workers’ compensation claim?

Usually, in Georgia, any money received as a result of public benefits is exempt in bankruptcies of Chapter 7 or 13. However, successfully navigating the interplay between these two very different sources of law requires effective communication with counsel and various filings, notifications, and budget adjustments with the bankruptcy court.

Also, as workers’ compensation claims can result in significant lump-sum awards, a bankruptcy trustee may file an objection to the debtor claiming rights to such an award, challenging the validity of the exemption.

Both the Federal Government and the State of Georgia have defined exempt assets which do include 100% of the recovery of a workers’ compensation case, but there are various exceptions. Additionally, Georgia has numerous bankruptcy regulations depending on which part of the state you reside in.

As a general rule, Georgia law defines as exempt those benefits received as a result of disability, illness, or unemployment benefits. Therefore, if you file for bankruptcy, you may generally protect and keep, among other things, the recovery of a workers’ compensation case.

Overall, if you have a workers’ compensation case pending or are receiving worker’s compensation payments, you can file a bankruptcy and keep the award when you receive it.

Note: It is extremely important to tell your bankruptcy lawyer about any benefits or settlements in advance, so that the workers’ compensation claim is properly listed as exempt on your bankruptcy petition.

Given the complexities in these situations, it is extremely advisable, especially if you are dealing with a lump-sum settlement, to confer with an experienced workers’ compensation attorney.