Workers Compensation Settlements and Bankruptcy- UPDATE

Bankruptcy Lawyer

If you live in Illinois and get hurt while working, you have the right to make a claim for those injuries through the Workers Compensation system.  If you go through the process, many times, your claim will be enough to pay your medical bills, plus more money for your injuries, to help you care for future problems.  In Illinois, the amount of money you receive for Workers Compensation pay or settlements are protected, or “exempt” from bill collectors.  It’s called the Workers Compensation Act.  Back in 2011, I wrote about Keeping Workers Compensation in Bankruptcy.

In some cases, people weren’t able to get enough money in the Workers Compensation claim to even pay their medical bills. Thanks to this exemption, people could file Chapter 7 Bankruptcy and eliminate these debts, and be allowed to keep their full Workers Compensation settlement.

In 2018, some Medical Creditors challenged this protection, and the United States Seventh Circuit Court agreed, and said that in Bankruptcy, the Workers Compensation protection from collection doesn’t hold up as to Medical creditors.  That’s the In Re Hernandez case (legal citation: 918 F.3d 563), which was decided in 2019.  But that court asked the Illinois Supreme Court to weigh in on this question. The Illinois Supreme Court said that the Workers Compensation Act does protect these claims from everyone!  (In Re Elena Hernadez 2020 IL 124661)

This means that if you are injured and get a Workers Compensation Settlement, that money you receive is protected, and, if you have to file for Bankruptcy protection, you can eliminate your debts.  Bill Collectors, and Medical Creditors cannot get that settlement.

This is important news, and settles this question, at least for now!  If you have questions about injuries, workers compensation, and bankruptcy, give us a call and we’ll see how we can help you.

Daniel J Winter