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  1. #4
    Join Date
    Apr 2018
    Location
    Long Beach, CA
    Posts
    236

    Default Re: Personal Injury Claims and Bankruptcy

    Quote Quoting Taxing Matters
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    What is taxable and what is not has nothing to do with whether the asset/income involved is attachable by creditors. After all, most pension income is, as you noted, beyond the reach of most judgment creditors but nevertheless is subject to tax. On the other hand, a personal injury award above the amount protected by federal bankruptcy law or state law bankruptcy exemptions (if the state has its own) is not protected from creditors in bankruptcy but is not subject to tax. No one is taking the debtor’s right hand. We are talking simply about money. And that money is awarded in significant part to pay the medical and other bills that the injured person incurred as a result of the injury. It would be odd indeed if those doctors, hospitals, and other creditors could not lay claim to the very money awarded to help the person pay those bills in the first place, wouldn’t it?



    You are making the mistake of assuming that your emotional reaction of what you think the law should be is what in fact the law says. I go by reading what the law actually says, as does Mr. K and others here. It was the law actually says that matters. And the law is not always logical, or at least not logical in the way you think it should be.
    But it is not income. It is basically trading a body part for cash. Your arm suddenly becomes a lump of cash.

    If a person required $100K/yr of medical treatment to keep his arm alive, could those assets/income be seized too? And off with the right arm? It's not much different.

    I realize taxes and bankruptcy is very different but the basis of those funds is very similar.

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