I filed Chapter 13 and it was approved May 2013. I have paid 8 months into the 36 month plan. I had an accident that resulted in being hospitalized with broken bones etc. I expect I will be receiving a personal injury settlement when I am released from the doctors care. I was told by my attorney that ALL of the settlement would go to the case even though the amount I had to pay back has been set. I owe 28 more payments to the plan. If I don't settle the P&I until the bankruptcy is discharged I understand that I will be able to keep the money. If I receive the settlement before the discharge but it is during the last year of payments can I legally NOT report the money until I do my taxes? In other words, in 16 months I begin the last year. If I settle my P&I in January 2015 and I make my last payment December 2015 and the Trustee discharges it anytime before April 15 (tax filing deadline) would I be safe to not tell my lawyer of the settlement because discharge should occur within 4 months after the last payment. I could even get an extention on filing my taxes should it take a little longer to discharge. Sixteen months is reasonable to hold off the settlement but twenty eight months is probably not.
2 Answers from Attorneys
Not reporting a settlement is a crime and you can go to prison. Do NOT play games like the ones you suggested. In fact you CANNOT even hire a lawyer to work your case without court approval so it appears you have already broken the law. You are already treading dangerously on a felony. Sit down with your lawyer. In some cases you may be better off NOT being in a 13 and dismissing it.
You must disclose the personal injury claim via amendment to your bankruptcy petition. It is a violation of the bankruptcy code not to do so. You may be able to retain some of the proceeds from the settlement but speak with a bankruptcy attorney about it.
If you have retained or retain in the future an attorney to represent you in your personal injury matter that attorney (or your bankruptcy attorney on their behalf) must file an Application with the bankruptcy court to obtain an Order from your bankruptcy judge appointing them as Special Counsel on your PI case (this has to be done even if your bankruptcy attorney is also representing you in the PI case). The attorney in the PI case cannot get his contingency fee if he failed to get approved as Special Counsel.
The settlement of your PI case has to be approved by your Bankruptcy Judge via motion filed with the Bankruptcy Clerk of Court. Either your bankruptcy attorney or the personal injury attorney will prepare and file the motion.
The Statute of Limitations in Georgia to bring suit on a personal injury claim is only two years from the date of the accident. If you file suit and defense counsel finds out you did not amend your petition to reveal the personal injury action your personal injury case is likely to to dismissed for failure to disclose it in your bankruptcy case.
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