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Settlement question

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#1 Mistakesmade


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Posted 24 January 2013 - 11:03 AM

I filed chapter 7 (in Ohio) a few years back. Before my case was discharged I had a medical issue. Almost a year after my case was discharged I was contacted about receiving a settlement. My settlement amount is a lot higher than the debt that was discharged. My question is: Can the trustee hold my entire settlement amount? I would like to have them to hold the amount that I had discharged (I have no issues with paying the debt) not the entire settlement.

#2 adjusterjack


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Posted 24 January 2013 - 11:54 AM

If I'm reading your post correctly your medical issue arose after you filed your petition for Chapter 7 bankruptcy.

If that's true then it appears that your settlement is not only not part of the bankruptcy estate but doesn't have to be reported to the bankruptcy trustee and you get to keep the entire settlement.

Read the following case decision and you'll see how that works.


Confirm that with your bankruptcy attorney.

Warning: Legal issues are complicated. Explanations and comments here are simplified and might not fully explain the ramifications of your particular issue. I am not a lawyer. I do not give legal advice. I make comments based on my knowledge and experience. I guarantee nothing. If you act on my comments without the advice of an attorney, you do so at your own risk.

#3 pg1067


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Posted 24 January 2013 - 12:52 PM

I filed chapter 7 (in Ohio) a few years back. Before my case was discharged I had a medical issue. Almost a year after my case was discharged I was contacted about receiving a settlement. My settlement amount is a lot higher than the debt that was discharged.

Some clarification would be helpful. You refer to a "medical issue," and then, without further explanation refer to a "settlement" (you only say you were "contacted about receiving a settlement," but I assume you actually did receive it). You then compare the amount of this unexplained "settlement" to the amount of some unidentified "debt that was discharged." This all implies that the "medical issue," the "settlement," and the "debt that was discharged" have some relationship, but the relationship is completely unexplained. My guess is that the "medical issue" arose out of some sort of accident for which you thereafter received the "settlement." The implication also appears to be that the "debt that was discharged" was for medical expenses you incurred as a result of the accident, but that's not clear. It is critical to the answer to your question that this information be clarified.

I disagree both with the conclusion stated in the prior response and that the case cited in the prior response supports the conclusion stated. For starters, the case cited is a Tennessee state court decision that has no authoritative value either in Ohio or as it relates to federal bankruptcy law. While both Tennessee and Ohio are in the Sixth Circuit (in the federal court system, the country is divided into circuits), the Headrick decision does not even rely primarily on Sixth Circuit authorities. In the Headrick decision, the Tennessee court concluded that the debtor-plaintiff's cause of action accrued eleven months after she filed her bankruptcy petition. The prior response suggests that the dispositive fact is if "your medical issue arose after you filed your petition." But, as the first paragraph of my response should indicate, what you meant by "medical issue" isn't at all clear. The question is when your cause of action accrued (i.e., when did you first know or have reason to know of facts that gave you the right to sue). Your post is unclear about this (again, we could make lots of assumptions, but you know what they say about that). But even the date of accrual of your cause of action is is not dispositive. The Headrick court noted that the case authority "indicate[s] that there may be no bright-line test for whether a cause of action that accrues post-petition will be included as part of the bankruptcy estate," and that making that determination involves a rather fact-based analysis. The court concluded that "the cause of action asserted by Ms. Headrick is not rooted in her 'pre-bankruptcy past' and so, even under that exception, there is no basis for finding that her cause of action is property of her bankruptcy estate."

Putting aside the question of whether a bankruptcy trustee or court in Ohio would agree or disagree with the Headrick decision, we don't have enough information to analyze your situation properly. It seems to me that, particularly if you had medical expenses relating to your "medical issue" discharged in your bankruptcy, you may have a very different situation than that described in Headrick.

You said that you "would like to have [the trustee] hold the amount that [you] had discharged" (as opposed to the entire amount), presumably for purposes of paying the one debt that relates to the "settlement." The problem with that is that, when you file a Chapter 7 bankruptcy, your non-exempt assets are supposed to be used for the benefit of all creditors, not just one or some of them. That you may have a particular debt that relates to a particular asset does not mean that creditor necessarily gets preferential treatment as it relates to the asset. Such a result might obtain if a creditor has a secured interest in a particular asset, but it's not clear whether that is or might be the case here. But, whatever conclusion is reached regarding the settlement being or not being property of your bankruptcy estate will apply to all of the settlement, not just some of it.

Where I do agree with the prior response is with respect to the statement that you should absolutely consult with your bankruptcy attorney about this.

#4 Guest_FindLaw_Amir_*

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Posted 01 February 2013 - 01:08 PM

As the previous poster stated, this is a matter you may want to clarify with your Bankruptcy Lawyer.

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