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Can Creditors Take My Personal Injury Settlement?

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Anytime a person is injured due to the careless or negligent actions of another individual or entity, they may be entitled to various types of compensation for their losses. In some cases, this comes in the form of an insurance settlement or a personal injury jury verdict.

However, what happens if the person who receives a personal injury settlement also owes money to others? What if they are going through bankruptcy? Can creditors take a personal injury settlement?

Here, we want to discuss whether or not creditors can take a personal injury settlement in the state of California. This is important for people to know, particularly if they do owe money to others and are expecting to receive a settlement after sustaining an injury.

Personal Injury Settlements Are Considered Exempt

Personal injury settlement monies are generally considered “exempt” when it comes to whether or not creditors can take the money. This means that a creditor cannot reach into a person’s bank account and garnish the amount. Additionally, if a person files for bankruptcy, they will get to keep all of the money paid to them through the personal injury settlement, even if it was a substantial amount.

However, there are steps that individuals need to take to protect personal injury settlement money in these situations.

Keep Funds Separate

If you are expecting to receive a personal injury settlement check, you need to deposit the money into a separate account from all over other finances. After you do this, you should not deposit any other type of money in the account that is not related to the personal injury settlement. Keep this account separate from everything else. If you commingle these funds with any of your other money, this could result in the personal injury settlement losing its exemption status.

If you or your family members have another source of income, make sure that goes into an account other than the one where your personal injury settlement is. You need to make sure that you can account for every dime inside the personal injury settlement account and prove that it came from the actual settlement.

Use Prepaid Debit Cards

If you know that creditors hold judgments against you, we suggest depositing your personal injury settlement onto a prepaid debit card and avoid a normal bank account altogether. While this may seem like a hassle, the reality is that many retailers offer prepaid debit cards that act just like any other debit card you may use.

We want to stress the importance of using a “prepaid” debit card. This card cannot be tied to any bank checking or savings accounts. Yes, there will likely be a small monthly fee attached to a prepaid debit card, but there will be virtually no way for any collections agencies or creditors to garnish the money on this card.

However, when you do go with a prepaid debit card route, you need to also make sure that you only deposit money onto that particular card related to your personal injury settlement. This will again ensure that the funds are not commingled.

Work With an Attorney

If you are expecting to receive a personal injury settlement, we hope that you have already retained assistance from a California personal injury lawyer. A personal injury attorney in Orange County will be able to help you navigate any of the roadblocks that you may run into if you owe money to creditors or are going through the bankruptcy process. Your attorney will have dealt with this before and will be able to help you establish the best path towards receiving your full settlement amount.

Covid 19 Update: We are accepting new cases and we handle everything electronically and remotely, so our clients never have to leave their homes.