This is a discussion you should ultimately have with the lawyer who handles your bankruptcy case. People can advise you about your odds, but at the end of the day it's you who will be rolling the dice. If you prefer to go through the bankruptcy and end up with some of that money still in your pocket, rather than spending it first, we are not in a position to tell you that lawyer #2 is correct about what the trustee will allow.
If you use the money to pay down your debts, that's not likely to be a huge deal for you -- because even if your creditors start fighting among themselves after you file, claiming that the payment was a preference (a payment that improperly benefits one creditor at the expense of another) they will be seeking to recover that money from the creditor that received the payment. But if you're using the money to pay your creditors before bankruptcy, there's not a whole lot of difference for you between that and having the money applied by the trustee to pay your creditors.
If you have not filed for bankruptcy, and have not been sued by any creditors, then you're in the position of pretty much every person who has more debt than he or she can handle. You can use your money and resources to support yourself, and that's not likely to affect your bankruptcy. If your car needs new tires or is broken down, you can fix it. If your roof is leaking or your furnace is broken, you can fix it. If you choose this route, you can discuss with your bankruptcy lawyer how you intend to use the money and how long you might want to delay filing for bankruptcy after you receive the settlement.

