Protecting Your Personal Injury Settlement From Creditors
When you obtain a personal injury settlement, that money is meant to compensate you for the harm you suffered. The settlement is meant to cover your medical bills, your lost wages, and the pain and suffering you endured as a result of your car crash, slip and fall, or other incident. If you have outstanding credit card debts and other creditors knocking on your door, is your personal injury settlement subject to collection? Is there any way to protect your injury award from creditors? Read on to learn about how you can keep your settlement for yourself and your family and away from creditors. Reach out to a savvy personal injury lawyer at Ochoa & Calderón for help with a personal injury claim in Riverside or Southern California.
Healthcare Providers and Health Insurance Companies Can Access Your Settlement
A personal injury settlement is intended to, at least in part, cover medical expenses you incurred as a result of your accident. If you owe money to a hospital for treatment of your injuries following an accident, those bills should be paid using the personal injury settlement proceeds. You may be able to negotiate a reduced total with the healthcare provider, but ultimately your settlement is meant to cover those bills.
Likewise, if your bills were covered by your health insurance provider (including a government provider such as Medicaid or Medi-Cal), the settlement proceeds may be used to repay the insurer for their costs. Your insurance provider is entitled to reimbursement from your settlement funds. As with the healthcare provider, you may be able to negotiate a reduced repayment and keep more of your settlement funds.
California Law Protects Personal Injury Awards from Other Creditors
Outside of reimbursement for healthcare costs, your personal injury settlement belongs to you. California law provides that creditors cannot seize or garnish proceeds from a personal injury settlement as part of their collection efforts. They cannot pull settlement proceeds from your bank account to pay off other debts, such as credit card debts.
Using California Law to Protect Your Settlement Proceeds
Although your injury settlement is exempt from garnishment, you may need to take steps to ensure your settlement proceeds benefit from that protection. California creditors who obtain a judgment against you can garnish up to either 25% of your disposable income or the amount by which your disposable income exceeds 40 times the state’s hourly minimum wage, whichever is lower. Disposable income means any money you have left over after paying for necessities such as rent and food.
If you deposit your settlement check into the same bank account as your other income, a court might not be able to distinguish which money in your account is regular income and which comes from the settlement proceeds. That means that a creditor who obtains a judgment against you might be able to attach that bank account and collect more than they would if they were just collecting from an account composed of your normal income.
To protect your settlement proceeds from collection, your best bet is to separate the settlement proceeds from other funds. Maintain a separate bank account specifically for your settlement proceeds and do not deposit other income, inheritance, or other funds into that account. Keep copies of any documents or paperwork generated in connection with your settlement and distribution of settlement funds so that you are ready to prove that those funds are protected from collection.
Talk to your personal injury lawyer about any judgments already obtained against you or that you expect to be rendered against you in the near future. Your attorney will help you generate a plan to protect your settlement proceeds from collection.
Talk to an Attorney Today
Having a knowledgeable and experienced personal injury attorney on your side can help ensure that any settlement you receive is structured to provide you with the utmost benefit, including favorable tax treatment and protection from creditors. If you or a family member has suffered a serious injury at work, on the road, on someone’s hazardous premises or due to a defective product, the personal injury lawyers at Ochoa & Calderón can advise you and represent you with skill and dedication toward obtaining a great result in your case. Call 951-901-4444 in Riverside or 844-401-0750 throughout Southern California for a free consultation.