Automobile Accident Claims in Bankruptcy: The Often-Overlooked Federal Personal Injury Exemptions

by Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

October 12, 2008

In consumer bankruptcy cases where the debtor has an unresolved personal injury claim, or no-fault insurance claim, arising from an automobile accident, don’t forget to utilize all available sections of the federal bankruptcy exemptions to protect the debtor’s right to compensation.  Sections 522(d)(10) and 522(d)(11) contain a veritable gold mine of exemptions which are often overlooked by debtors’ attorneys.  If you have an automobile accident-based personal injury case and are filing bankruptcy, read these sections carefully with your attorney.  You’ll be glad you did.

The obvious exemption, 11 U.S.C. section 522(d)(11)(D), is a no-brainer and is rarely missed by anyone.  This section authorizes the exemption of $20,200 of proceeds for a personal injury claim, excluding pain and suffering or actual out-of-pocket losses (careful drafting of the settlement papers, if any, is therefore necessary).  It is the other exemptions that are sometimes overlooked.

Section 522(d)(10)(C) allows an exemption of the debtor’s right to receive a disability, illness, or unemployment benefit, with no limit on the dollar amount.  Arguably, this would cover no-fault insurance benefits if based upon the debtor’s inability to work after an automobile accident.

Section 522(d)(11)(B) allows an exemption for payments on account of wrongful death, to the extent needed for the support of the debtor or the debtor’s family.  This clearly should apply to wrongful death claims arising from automobile accidents.

Section 522(d)(11)(E) allows an exemption for payments on account of loss of future earnings, to the extent needed for the support of the debtor or the debtor’s family.  There is no reason this section should not apply to no-fault wage loss claims, or personal injury awards, arising from automobile accidents.

And, of course, the $11,200 “wild card” exemption of section 522(d)(5) can always be applied to any portion of the debtor’s automobile accident claim which cannot be exempted under the above sections of the bankruptcy law.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.

Last modified: February 20, 2013