Can Personal Injury Settlements Be Protected from Bankruptcy in Pennsylvania?

The last thing you want is for a personal injury settlement to be taken by greedy creditors rather than going to the very real damages you have incurred and need help covering if you don’t intentionally protect your settlement with exemptions or by filing Chapter 13.

The federal exemption for personal injury settlements during bankruptcy is just over $30,000 in 2025. While you may be able to use several exemptions to increase the amount of the personal injury settlement you can exclude, it may not be totally protected if you file Chapter 7, especially if you do so without our attorneys’ help.

Call Young, Marr, Mallis & Associates at (215) 701-6519 to get a free case discussion with our Pennsylvania bankruptcy lawyers.

How Can You Protect a Personal Injury Settlement During Bankruptcy in Pennsylvania?

Your personal injury settlement should go towards the damages you incurred from negligence, not creditors. Protecting a personal injury settlement from bankruptcy is very important, and our lawyers can help with this by ensuring you claim the right exemptions.

Using Federal Exemptions

There is a specific federal “personal injury exemption” that you can use to exclude up to $31,575 of a personal injury settlement in 2025 if you choose federal exemptions.

You may also use the federal wildcard exemption that lets you exclude up to $1,675 of any property, including a personal injury settlement. You may also use up to $15,800 of an unused federal homestead exemption.

“Stacking” federal exemptions may let you exclude up to $49,050 of a personal injury settlement from bankruptcy in 2025.

Using State Exemptions

Pennsylvania doesn’t have a specific exemption for personal injury settlements if you choose state exemptions. Its wildcard exemption only lets debtors exclude up to $300 of any property they want, which might barely scratch the surface of your personal injury settlement.

Filing Chapter 13

You may protect a personal injury settlement by filing Chapter 13 bankruptcy rather than Chapter 7, which requires asset liquidation and puts your personal injury settlement and other property at risk. We can see if you qualify for Chapter 13 by assessing your income and running you through a “means test” to determine whether you can settle your debts through a repayment plan that spans three to five years.

Can You Use Federal and State Exemptions to Protect a Personal Injury Settlement from Bankruptcy?

As mentioned, there are federal and state-specific exemptions for assets during bankruptcy. You have to choose which set of exemptions will help you the most, whether federal or state. You cannot choose both types.

You must decide between federal and state exemptions to protect a personal injury settlement and other assets. Federal exemptions are considerably better than Pennsylvania’s regarding personal injury settlements and other property, as the applicable state exemption, the wildcard exemption, only lets you exclude up to $300.

What if You Don’t Protect Your Personal Injury Settlement During Bankruptcy?

If you don’t intentionally protect your personal injury settlement during bankruptcy, it may be used to settle your outstanding debts with creditors. This could put you at risk of getting into medical debt if you cannot pay upcoming medical bills with your settlement, so don’t underestimate the importance of protecting this sum of money during bankruptcy.

If you don’t disclose your recent personal injury settlement or any other assets when you file for bankruptcy, you might face considerable penalties and could lose a large portion of your settlement to the bankruptcy court, as well as creditors.

Furthermore, your bankruptcy case might be dismissed, putting you at risk of wage garnishment, vehicle repossession, and even mortgage foreclosure from creditors no longer inhibited by bankruptcy’s automatic stay.

FAQs About Protecting a Personal Injury Settlement from Bankruptcy

Can Creditors Take Personal Injury Settlements Before Bankruptcy?

If you are in considerable debt and haven’t yet filed for bankruptcy, creditors might file a lawsuit against you to seek repayment and go after your largest assets, like your home, car, and even a recent personal injury settlement.

Do You Have to Disclose a Personal Injury Settlement During Bankruptcy?

You must disclose a personal injury settlement when you file for bankruptcy, as it’s one of your assets. Exemptions may not cover the entire settlement, and the bankruptcy court may use the rest to help repay creditors.

Can Filing for Bankruptcy Protect Your Personal Injury Settlement from Creditors?

Filing for bankruptcy may protect your personal injury settlement from creditors if you file Chapter 13 specifically. Chapter 13 doesn’t involve any asset liquidation, and the debtor’s debts are consolidated at a single interest rate and repaid in installments.

Should You File Chapter 7 Bankruptcy if You Have a Personal Injury Settlement?

Filing Chapter 7 bankruptcy is risky if you recently received a personal injury settlement in Pennsylvania, as you most likely cannot exclude all of it from your case.

Do You Need a Lawyer to Protect Your Personal Injury Settlement During Bankruptcy?

Without a lawyer, you might cause the wrong liquidation exemptions, fail to meet important bankruptcy deadlines, fail to receive a debt discharge, and face many other issues during your bankruptcy case.

How Do You Claim Exemptions to Protect Your Personal Injury Settlement from Bankruptcy?

Our Pennsylvania bankruptcy lawyers can use the bankruptcy form Schedule C to identify the exemptions we want to make and for what specific assets. Fail to list any exemptions, and they will not be included in your bankruptcy case.

Should You Use Your Personal Injury Settlement to Avoid Bankruptcy?

While your personal injury settlement should go towards medical bills and other expenses from an injury, you shouldn’t have to use it to cover previous debts. Filing the right bankruptcy chapter and choosing the right liquidation exemptions can protect the settlement during bankruptcy, so you don’t have to worry about losing it.

Reach Out About Your Pennsylvania Bankruptcy Case Now

Call Young, Marr, Mallis & Associates for help with your case from our Pennsylvania bankruptcy lawyers at (215) 701-6519.