The settlement amount that you win after a car accident can go a long way in helping you pay for your medical bills and other expenses if you were recently injured in an accident. However, you may be subject to garnishment action at the hands of creditors if you owe a large debt.
Many people consider bankruptcy since it offers the debtor an opportunity to rebuild their credit score. Another significant advantage of declaring bankruptcy is that creditors cannot harass you. Collection agencies can be quite aggressive. They can use questionable tactics for recovering money. For instance, they may call you at inconvenient times.
In New York, personal injury settlements are exempt at the hands of the creditors to some extent. Creditors, as a result, are prohibited from taking a part of the personal injury settlement as recovery for their debts. This is primarily because personal settlements cannot be seized by creditors to a certain extent. They don’t have the right to take any part of your injury settlement.
However, even though the settlement is recognized as being exempt under New York law from creditors, it is important that people who owe settlements and debt take critical actions for protecting their assets.
Income execution refers to an order from a government agency or a court requiring the employer to withhold some part of the money from their paycheck to benefit the creditor. There are legal limits in place dictating the amount of paycheck that can be garnished by a creditor. This depends primarily on the debt type.
Assets can be seized from the debtor by the creditor through garnishment. This is a legal proceeding allowing creditors to take resources from the debtor to satisfy the judgment. Creditors cannot start taking your assets by claiming you owe them money.
Instead, creditors have to take a legal judgment against debtors. Creditors are also required to take the necessary steps for filing garnishments and serving them properly. Garnishment is a lawful judgment by way of which the creditor can collect from the debtor’s assets.
Medical Care Liens Following an Accident
Liens in New York can be filed against settlements for personal injury. These liens usually get filed by parties providing medical care that results from injuries leading to a settlement. Medicare and Medicaid physicians and agencies are some of the parties filing these liens. These liens can also be filed by private carriers.
You may be asked to sign a lien if you were injured in an accident and your medical treatment is not covered by your health insurance. The lien will state that the treatment provider has the right to recuperate the cost of service from the recovered settlement. The medical provider may garnish your personal injury settlement to pay for the medical costs.
Child Support Liens
Child support obligations are taken seriously by New York. Parties can face significant consequences if they fail to pay child support. In New York, liens can be filed against the personal injury claim of a parent for collecting overdue child support.
Protecting Personal Injury Settlements
Individuals in New York are not allowed to protect their full personal injury settlement. Nonexempt assets are eligible for distribution for the payment of creditors in exchange for discharging all unpaid debts if the debtor files for Chapter 7 bankruptcy.
In New York, people filing for bankruptcy can choose between utilizing state and federal bankruptcy exemptions. Most people tend to prefer federal exemptions since they have more generous guidelines than the ones within the state.
These are a few of these generous guidelines:
Keeping Assets Separate is Vital
A critical step in protecting settlements is keeping your funds separate from the money you own. Bankruptcy exemptions apply to compensation and settlements and may not apply to other funds present in your bank account.
You risk obscuring funds protected under bankruptcy exemption if you deposit the settlement amount where you get your paycheck. This act is referred to as “commingling” funds. You should avoid doing this wherever possible.
Creditors tend to argue that commingled assets do not have an exemption status. Often, legal actions are filed to seize these funds. You may need to devote some time to set up a separate bank account for your settlement. But, in the long run this is a much better option since it avoids the risks arising from commingling funds.
Some people in their bid to further distinguish the two accounts use a separate financial institute for creating a bank account. This helps in decreasing the risk of commingling funds accidentally.
Protecting Personal Injury Settlements in New York
These are a few things you should remember about protecting personal injury settlements from creditors.
Student Loans, Child Support, and Unpaid Taxes Limits
The creditor or government can garnish your wages without having to wait for a court judgment if you owe student loans, child support, and taxes. The amount of maximum garnishment in these cases is different.
All court orders since 1988 for child support include an automatic income withholding order. It is possible for the other parent to get a wage garnishment order if you are behind on child support payments. Garnishment as per federal law is limited to 50% of the disposable earnings if you support a child or a spouse that is not subject of the order.
Sixty percent of your earnings can be taken if you are not supporting a child or a spouse. An additional 5% may be garnished as part of support payments in arrears over 12 weeks.
Defaulted Student Loans
The US Department of Education or another entity collecting for them has the right to garnish your wages without a court judgment if you have defaulted on a federal student loan. This will be done under administrative garnishment. Up to 15% of your disposable income can be garnished by the Department of Education. However, the amount cannot be more than 30 times the amount of minimum wage.
Your wages can be garnished by the federal government without a court order if you owe back taxes. The amount will depend on your deduction rate and the number of dependents you have. Local and state governments also have the right to garnish wages to collect unpaid local and state taxes.
Wage Garnishments and Losing Your Job
It can be annoying for your employer to comply with wage garnishment orders. They may terminate your employment because of this. Federal and state law may afford you some protection in this situation. Your employer cannot fire you under federal law if you have one wage garnishment. However, you won’t be protected under federal law if you have more.
You should check with a local attorney regarding state protections. Income execution is no excuse for an employer to fire, refuse to promote or take any negative action.
Consult with an Experienced Personal Injury Attorney in NYC
Outstanding debts and student loans can amplify the stress of a personal injury claim in New York City. You should plan ahead by staying informed. The dedicated and resourceful personal injury attorneys at Rosenberg, Minc, Falkoff & Wolff have the necessary knowledge and experience to evaluate your situation and help you with the best possible legal strategy. call Rosenberg, Minc, Falkoff & Wolff, LLP today at 1-800-660-2264 or contact us online.
|$15 Million - Jury Award Against Hospital|
|$10.5 Million - Malpractice Infant Brain Damage|
|$9 Million - Brain Injured Baby Settlement|
|$7.75 Million - Pediatric Intensive Care Unit|
|$7.5 Million - Injured Construction Worker Settlement|
|$7.25 Million - Intersection Accident Settlement NYC|
|$5.5 Million - Bus Accident Award|
|$5.5 Million - Injured Child|
|$5.5 Million - Blinded Woman|
|$5.45 Million - Injured Child|
|$5.4 Million - Construction Burn Victim|
|$5.1 Million - Motorcycle Victim|
|$5 Million - Eye Surgery|
|$4.5 Million - Failure to Perform C-Section|
|$4.5 Million - Personal Injury Settlement|
|$4.4 Million - Failure to Diagnose Infection|
|$4.125 Million - Failure to Diagnose Quadriplegia|
|$4.0 Million - NYC Hospital Negligence Birth Injury|
|$3.8 Million - Electrician|
|$3.75 Million - Hospital Negligence Sepsis|
|$3.7 Million - Birth Injury Infant Stroke|
|$3.5 Million - Faulty Freight Elevator Fall|
|$3.4 Million - Surgical Error Bronxville Hospital|
|$3.28 Million - Eye Surgery Case|
|$3.15 Million - Settlement for a Brooklyn Laborer|
|$3.1 Million - Verdict Returned by NY Jury|
|$3.1 Million - Awarded by Brooklyn Jurors|
|$3 Million - Birth Injury Development Delays|
|$3 Million - Settlement Scaffold Injury Hudson Yard|
|$3 Million - Hot Water Burn Death|
|$2.6 Million - Surgical Error Premature Death|
|$2.5 Million - Hospital Malpractice Toddler Hemiplegia|
|$2.4 Million - Failure to Diagnose Lead to Paralysis|
|$2.3 Million - Birth Injury Brain Damage|
|$2.1 Million - Hospital Negligence Birth Injury|
|$2.1 Million - Failure to Diagnose Stroke|
|$2.1 Million - Surgical Error Paraplegic|
|$2.1 Million - Injured Worker|
|$2 Million - Hospital Negligence Permanent Injury|
|$2 Million - Malpractice Settlement Delay in Delivery|
|$2 Million - Verdict against Hospital|
|$1.8 Million - Failure to Diagnose Tumor|
|$1.75 Million - Diagnosing Prostate Cancer|
|$1.5 Million - Prostate Procedure Malpractice|
|$1.5 Million - Delay in Treatment - Nerve Damage|
|$1.4 Million dollar settlement in Action Over Explosion|
|$1.26 Million - Disabled Vehicle's Driver Hit|
|$1.15 Million To Slip-and-Fall Victim awarded by Jury|