How are Structured Settlements Affected by Bankruptcy?
What Happens to Your Structured Settlement if you File for Bankruptcy?
How your structured settlement is affected depends on:
- the type of bankruptcy you file
- the laws of your jurisdiction.
In general, structured settlements are designed to provide long-term financial security and are often considered exempt or protected assets in bankruptcy proceedings. However, it’s important to consult with a bankruptcy attorney or a financial professional to get accurate and up-to-date advice based on your specific circumstances and local laws.
Here are some key points to consider regarding structured settlements and bankruptcy:
What is Chapter 7 Bankruptcy?
What is Chapter 13 Bankruptcy?
State Bankruptcy Laws
State laws play a significant role in bankruptcy proceedings, including the treatment of structured settlements. Each state has its own set of exemptions and rules regarding bankruptcy, and some states may provide stronger protection for structured settlements than others.
Bruce W. Akerly, a bankruptcy attorney in Lewisville Texas, with the law firm of Akerly Law PLLC, points out that because they do not own the annuity or have sold and/or assigned payments under an annuity, many debtors will not list, or forget to list, their annuity payment streams in bankruptcy.
Akerly says that “when preparing a schedule of assets for a bankruptcy filing, structured settlement payment rights must be properly and completely disclosed. This includes (a) all payments, whether guaranteed or life contingent, (b) near-term payments and (c) payments that may not be due for many years. It includes monthly, annual, lump sum and all other forms of payment”
Source: The Impact of Bankruptcy on Structured Settlement Payment Streams
by Bruce W. Akerly January 31, 2023