Workers’ Compensation Benefits and Bankruptcy

If you have been hurt on the job, and have fallen behind on your financial obligations, a personal bankruptcy filing can stop the endless calls and letters from creditors. You may be worried, though, that the benefits you receive from your workers’ compensation claim may be taken by your creditors as part of the bankruptcy proceeding. In New Jersey and Pennsylvania you can protect 100% of your worker’s compensation benefits from your creditors in bankruptcy.

Your Right to Receive Workers’ Compensation Benefits

Filing for bankruptcy protection will not prevent you from applying for and receiving workers’ compensation benefits. Your workers’ compensation award will be based on wages earned before your injury. The fact that you have sought bankruptcy protection has no impact on your right to recover compensation for a work-related injury.

Your Right to File for Bankruptcy Protection

When you seek protection in bankruptcy, the bankruptcy court will look at all of your assets to determine which will be included in what is known as the “bankruptcy estate,” so that the court can determine how much is available to satisfy your creditors. Both state and federal bankruptcy laws allow you to claim exemptions on certain amounts of real and personal property. Workers’ compensation payments are considered to be future earnings and, accordingly, cannot be included in the bankruptcy estate.

If, however, you have a filed a workers’ compensation claim at the time you seek bankruptcy protection, but your claim is still pending, the situation can become more complicated. If your employer has any potential claims against you (say, for overpayment of wages), your employer may ask the court to remove the automatic stay to allow recovery of those payments.

Contact John Hargrave & Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

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