But if you do have a personal injury case pending, or a workman’s comp case, or any other civil lawsuit where you might receive a lump sum of money, it may be advantageous to wait.
While it can be stressful to wait for your settlement or award, it may be even more stressful to lose most of that money. If you receive the settlement while you’re in the middle of a bankruptcy most of the money will go to the estate. There are personal injury exemptions, but you can only claim up to $23,675 of compensation for bodily injury. There are certain laws which allow us to push the exemption up to $47,350 if both spouses are filing.
This is a situation that calls for some strategy. You’d want to look at how much you are anticipating versus the level of debt you have. In a case where the award that you’re anticipating will pay your bills and leave a huge sum of money besides, waiting is smart. You could lose most of the money to a trustee. Bad news, if some of it was meant to cover your living expenses because you can no longer work.
The amount of money you’re going to win isn’t the only consideration in whether you file for bankruptcy while the claim is outstanding. Trustees don’t always allow borrowers to keep their own attorney. Sometimes they pursue the claim themselves. Sometimes they settle for far less than you’d have gotten, is all they care about is getting the debts paid. Meanwhile, had you waited, you could have gotten everything you needed to pay back the debt, and then some.