When someone suffers a work accident, their income may be significantly reduced. New Jersey Workers Compensation insurance provides three fundamental benefits, medical treatment, temporary disability benefits, and a permanency award. The medical treatment is limited to authorized (designated) medical professionals except for emergency care and if the employer (or insurance carrier) fails to designate a treating doctor or denies the occurrence of the accident. Temporary benefits are 70% of an injured worker’s Gross Salary but are capped at maximum rates depending on the year of the accident. Permanency benefits are normally only awarded after treatment is completed and a 26 week waiting period and permanency examinations are conducted and a settlement agreement reached or a trial conducted and a judicial decision rendered. So, if the injured worker was making significantly more than the maximum temporary disability rate, there may be a need to file for Bankruptcy protection.
Bankruptcy exists to provide individuals with a fresh start by eliminating debt. The Bankruptcy proceeding is a serious undertaking conducted in Federal Court and under the watchful eye of a Bankruptcy Trustee whose job is to ensure that creditor rights are protected by discovering all assets of the Bankruptcy applicant that could be used to pay creditors. A consultation with an attorney who handles Bankruptcy matters is essential to a smooth bankruptcy proceeding.
A common question that is asked is whether the Bankruptcy Attorney should be told about a pending Workers Compensation case. The Answer is a definitive Yes. A Bankruptcy applicant must reveal all assets some of which are exempt from bankruptcy but must be stated on the Bankruptcy application as part of the Bankruptcy application. The Bankruptcy Trustee will review the application and question the applicant to ensure that full candor and truthfulness is reflected in the Bankruptcy Petition paperwork. A pending Workers Compensation matter is important to list on the Bankruptcy application and it is also important to state that the proceeds from the Workers Compensation are exempt from creditors so that no proceeds from a future Workers Compensation case settlement are awarded to creditors.
Under Federal Bankruptcy Law, the proceeds from a New Jersey Workers’ Compensation case are fully exempt. Section §522(d) (10)(C) of the Federal Bankruptcy Law, states that the “right to receive a disability, illness, or unemployment benefit.” is exempt from creditors. Section 522(d) (10) (C) is further supported by caselaw. In the case of In re Evans, 29 B.R. 336 (Bankr. N.J. 1983) holds that workers’ compensation awards are exempt under 522(d) (10)(C) in their entirety, as are permanent and temporary disability payments. In addition, New Jersey Workers Compensation Law, NJSA 34:15-29 exempts all Workers’ Compensation awards, including temporary benefits and permanency benefits from all claims of creditors and levy, execution, or attachment. So it is clear that you should tell your bankruptcy attorney about your Workers Compensation case and that attorney should state that the present and future proceeds from that Workers Compensation case are exempted assets and not subject to being used to pay creditors. It would be prudent to site specifically to the two statutes above in case to educate anyone reading the Bankruptcy Petition of the basis of the exemption.