The answer is YES, but there are some key issues for you to consider before you file:
- WILL I QUALIFY FOR CHAPTER 7?
Unless your debt is primarily business debt, in order to qualify for Chapter 7, you must first pass the Means Test. The Means Test considers your total household income over the 6 months prior to the month you file bankruptcy and your allowable expenses (based on National and Local Standards used by the Internal Revenue Service) to determine whether you have enough disposable income to propose a repayment plan to creditors.
If your income is below the median income level for your county/state, then you will qualify. If you were working and earning your regular salary during the 6-month lookback period, your average monthly income may be too high (since your workers compensation benefits are only 2/3 of your wages). If your income is above the median income, you may still qualify, but you may also need to consider a Chapter 13.
If you are just starting to receive Temporary Total Disability (TTD) benefits, you may need to wait a few months before filing to ensure that you qualify or that your Chapter 13 payment will be manageable.
- HOW LONG WILL I RECEIVE WORKERS COMP BENEFITS?
Your TTD benefits could last anywhere from 6 months to 6 years. The length of time that you will receive benefits, will help to determine whether you can propose a long-term repayment plan through Chapter 13 or whether you will most likely need to file a modification of your plan once your income increases. Filing bankruptcy under the assumption that your TTD benefits will be there forever is setting yourself up to fail. The steadier your income stream the smoother your Chapter 13 plan will work.
- IS MY WORKERS COMP SETTLEMENT EXEMPT IN BANKRUPTCY?
In Alabama, the answer is YES. §25-5-86 of the Alabama Code provides that “Claims for compensation, awards, judgments, or agreements to pay compensation owned by an injured employee or his or her dependent shall not be assignable and shall be exempt from seizure or sale or garnishment for the payment of any debt or liability.” So, when you receive a substantial lump sum payment, your work injury settlement should be exempt. However, this begs the question of whether you would even need to file bankruptcy since most of your creditors cannot seize or garnish your TTD benefits. Make sure you speak with an experienced bankruptcy lawyer before you decide to file to determine the best time to file.
If you are struggling to pay your debts and concerned about the future welfare for you and your family, it is important that you seek the advice of a bankruptcy lawyer to ensure that your assets are protected and the debts you seek to eliminate are dischargeable. Our attorneys have been assisting consumers and business owners with bankruptcy matters for over 25 years. If you are considering filing for bankruptcy, please consider contacting the Nomberg Law Firm. Our office number is 205-930-6900.
Steven D. Altmann has been a lawyer for more than 25 years. Steve has earned an AV rating from Martindale-Hubbell’s peer-review rating and was recently named a Super Lawyer and Top Attorney by Birmingham Magazine in the area of Bankruptcy Law.
We are a Federal Debt Relief Agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.