A workers' compensation settlement is a type of protected asset in California, which you get to keep. The same rule applies to workers' compensation benefits that have been awarded to you through a legal proceeding. This reflects the underlying policy and goal of the bankruptcy laws to give the honest debtor a fresh start.
If you were to file bankruptcy and had to give up everything, including your home, your car, your clothes, your retirement, and your bank account, then you wouldn’t really be getting any kind of a “start.” Rather, you would be placed in a financially devastating situation and would practically be homeless. This was not the intention of our founding fathers when they created your Federal legal right in the United States Constitution.
To have any real chance at a new start in life, you’ll need a place to live and call home, you’ll need a car, you’ll need clothes to wear to go to work, and you’ll probably want to have a bank account. So the laws were created to allow you to keep these items, up to a certain amount as specified by your exemptions (laws that specify what assets you may keep when you file bankruptcy).
Your entitlement to receive workers compensation benefits is also a type of benefit or asset that you get to keep when you file bankruptcy San Diego. In fact, regardless of which type of exemptions you choose, Federal or California exemptions, the exemption amount for a workers comp award or settlement is unlimited. That means that no matter how much the amount of your workers comp settlement or award is, you get to keep it all when you file bankruptcy San Diego. This is in sharp contrast to most other items of property or other assets, which Federal law places a limit on the amount you can keep when you file bankruptcy.
Now there is one big exception. If you have done anything to change the character of the workers comp benefit or award, then it won’t qualify under the workers comp exemption. For example, many people entitled to a workers comp award, or who are expecting a workers comp settlement, obtain advance payment through either a structured settlement provider or some other source. Also, the settlement agreement that you sign in connection with your workers compensation award may have certain legal terminology that disqualifies your workers comp award from receiving bankruptcy protection. It is therefore critical that if you are anticipating a workers compensation benefit, that you do not sign any settlement agreement or other document without first having your lawyer review it to make sure that you will be able to keep the workers compensation settlement or award when you file for relief.