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How Can Outstanding Debt Affect My Personal Injury Compensation?

Posted on behalf of Anderson Cummings on Feb 16, 2021 in Personal Injury

debtThe average American household has around $65,000 in debt. That is why a personal injury often creates a financial crisis for victims and their families. If you file an injury claim and it is successful, you may be concerned about your settlement being garnished by creditors.

If you have questions about filing an injury claim and how it may be affected by your debt, call the Fort Worth car accident lawyers to see how we may be able to help you. The initial consultation is free of charge.

Can a Personal Injury Settlement be Garnished in Texas?

This is a complex issue that you should strongly consider discussing with a licensed attorney, as there are steps that he or she can take to protect your settlement from being garnished.

A personal injury settlement is generally exempt from garnishment for outstanding debt, but there are some exceptions. For example, Texas law allows a lien to be placed on a settlement if you owe child support.  

What is a Lien?

A lien is a legal claim on a person’s assets, such as physical property or money awarded after a personal injury settlement. Liens give creditors, also known as lienholders, the right to pursue legal recourse against you until the debt is paid off.

Lienholders are usually banks, but they could also be hospitals, doctors’ offices or insurance companies.

Who Can Put a Lien on my Personal Injury Settlement?

If you have outstanding debt to a creditor, there is a chance a lien may be placed on your personal injury settlement. For personal injury cases, a lienholder is usually a medical facility that provided service while your claim was in progress and a lien was negotiated as a form of payment in exchange for treatment or other health care that was provided.

Medicare, Medicaid or a private health insurance company may also place a lien on your settlement if you were provided treatment at their expense while awaiting a settlement from an injury claim. This is something a lawyer may be able to help you negotiate so you might pay a lower price for the services that were provided.

When filing for bankruptcy, there is also a chance some of these creditors may attempt to place a lien on your settlement if your injury happened while you were in the process of filing either a Chapter 7 or Chapter 13 bankruptcy.

Can My Settlement be Exempt from a Bankruptcy Proceeding?

Texas is one of the few states that allows a person filing for bankruptcy to choose between state or federal exemptions when filing.

In Texas, a personal injury settlement is not exempt from being counted as property included in a bankruptcy filing.

Protecting Your Injury Settlement

Keeping your personal injury settlement protected from potential lienholders is generally a priority for most people since injuries often leave a person out of work for an extended period and cause them to fall farther behind on bills.

That said, there are some ways to go about protecting your settlement, such as paying off your debts. This is easier said than done since most Americans have multiple credit cards, loans and other possible lienholders. But even if you cannot pay off all the debt, you may be able to negotiate a repayment plan with creditors, so your accounts are at least up to date.

Call a Knowledgeable Attorney for Legal Help

Do not let the fear of outstanding debt keep you from filing a claim if you suffered an injury due to another’s negligence.

You should speak to an experienced attorney about what your legal options may be for recovering compensation for medical bills, lost wages and other damages. We work on contingency, which means there are no upfront fees for our services.

Call today to schedule a free consultation: (877) 920-9009