Are Structured Settlements Exempt in Bankruptcy?:

Are Structured Settlements Exempt From Bankruptcy in California?

California addresses structured settlements in its bankruptcy laws.

If you Choose " Exemption System 1"...

A. Personal Injury Actions

 CCCP § 704.140(a)

A cause of action (claim before recovery) for personal injury is exempt.

CCCP § 704.140(b)

An award of damages or a settlement (lump-sum) arising out of a personal injury is exempt to the extent necessary for the support of you, your spouse, and your dependants.

CCCP § 704.140(d)

Where an award of damages or a settlement arising out of a personal injury is payable in installments (structured settlement) it is treated as earnings.  With respect to Paid Earnings:

 CCCP § 704.070

100% of earnings paid within 30 days are exempt if you are subject to an earnings assignment order for support.

75% of earnings paid within 30 days are exempt if you are not subject to an earnings assignment order for support.

B. Wrongful Death Actions 

CCCP § 704.150(a)

A cause of action (claim before recovery) for wrongful death is exempt.

CCCP § 704.150(b)

An award of damages or a settlement (lump-sum) arising out of a wrongful death of your spouse, or someone for whom you were a dependant, is exempt to the extent necessary for the support of you, your spouse, and your dependents.

CCCP § 704.150(c)

Where an award of damages or a settlement arising out of a wrongful death of your spouse, or someone for whom you were a dependant, is payable in installments (structured settlement) it is treated as earnings. (See Paid Earnings above).

C. Workers’ Compensation

 CCCP § 704.160(a)
Workers’ compensation claims, awards, and payments are exempt.

 Source: Consumer Law Center, Inc.

 

 

Structured Settlement For Lost Consortium Not Exempt in Bankruptcy

In its decision of In re Marble, 2010 WL 3198901 (E.D.Mich.), the U.S. District Court reversed a bankruptcy court's decision that a structured settlement annuity was an exempt asset in a bankruptcy proceeding.

"Debtor may exempt property traceable to payments in compensation for loss of future earnings of an individual on whom the debtor is or was a dependent. Debtor must show that annuity given as part of structured settlement of Debtor‘s father‘s personal injury action is traceable to payment in compensation for lost future earnings of father and that Debtor is or was a  dependent of Father. Annuity did not constitute payment for lost earnings of Father where only claim made in state court litigation on behalf of Debtor was for "lost consortium" and Michigan law did not permit a third party including a child to maintain a direct action for lost wages of a third party".   

Source:  Detroit Consumer Bankruptcy Conference November 11, 2010