Kaplan v. Dutra – Protecting Debtor’s Personal Injury Claims in Bankruptcy

Personal bankruptcy filings have been declining in recent years – which is an indicator of national recovery. But there were still 3,440 filed in Florida just in January 2016. Such filing are popular in the first month of the year, when consumers begin to carefully assess their finances after the holidays. Bankruptcy, of course, should be the last and final option for anyone facing financial hardship, as so many personal injury victims do after suffering from severe injuries. sad

In most situations, people who have obtained a favorable judgment for that personal injury are allowed to claim an exemption to be able to retain those damages, instead of having to dole it out to creditors. However, there could be some variation of this from state-to-state.

In Florida, you can keep the money you get (or will get) as a result of a lawsuit or settlement award – if that money is exempt under state and/or federal statutes. Florida’s personal injury exemption is listed in F.S. 769.05, which protects settlements or awards received if you are injured in a hazardous occupation. The law also allows you to keep up to $1,000 of your own personal property, up to $1,000 of a lawsuit or settlement and up to $4,000 of personal property (which includes a lawsuit or settlement award). Keep in mind that if you have commingled your funds, you may potentially lose your settlement or jury award. A bankruptcy attorney can help you sort this all out, but if you are considering bankruptcy prior to filling a personal injury lawsuit, you may want to discuss this with your injury lawyer to make sure you’ll be able to keep whatever you win. 

We saw one such matter play out in the recent case of Kaplan v. Dutra, weighed by the Nevada Supreme Court. This started as a bankruptcy case and was referred to the state high court to resolve a question of state law on personal injury exemptions in bankruptcy cases.

Claimant filed for Chapter 11 bankruptcy, which was later converted to a Chapter 7 bankruptcy. Prior to his filing, he was involved in two separate personal injury lawsuits. The first involved a back injury stemming from a dog attack. He had to have surgery on his back as a result of that incident. The second case happened six weeks later, when claimant was rear-ended, resulting in additional injury to his back that slowed his recovery from his earlier back surgery. He then had to undergo another back surgery and filed personal injury claims for both incidents.

He won both injury lawsuits. Although it’s not clear for how much, when he filed for bankruptcy, he sought two personal injury exemptions for the maximum allowable under state statute – $16,150.

The bankruptcy trustee filed an objection to the fact plaintiff had filed two exemptions for personal injury. The trustee claimed only one personal injury exemption was allowed under state law. The matter was then sent to the state supreme court for resolution. The court was asked whether a debtor was entitled to more than one personal injury exemption if he or she has more than one personal injury incident.

The court answered in the affirmative. The court ruled that state law on the issue is ambiguous, but reason and public policy suggest the law should be read to provide for multiple personal injury exemptions on a per-claim basis. The court added that historically, state exemption statutes should be liberally and beneficially construed in favor of the debtor.

Call Fort Lauderdale Injury Attorney Richard Ansara at (954) 761-4011. Serving Broward, Miami-Dade and Palm Beach counties.

Additional Resources:

Kaplan v. Dutra, Dec. 1, 2016, Nevada Supreme Court

More Blog Entries:

Lawsuit: Hospital Negligence In Treatment of Crash Victim Resulted in Paralysis, Dec. 14, 2016, Fort Lauderdale Personal Injury Lawsuit