Debtor Gets To Keep Money From An Auto Accident That Happens During Chapter 13 Case

In a recent case in Bankruptcy Court in Houston, Texas, U.S. Bankruptcy Judge Marvin Isgur ruled that a lady could claim as exempt and keep part of the money that she was due from an auto accident, that had happened after she filed chapter 13 bankruptcy. He allowed her to amend her "Schedule C" and claim as exempt $10,630 of the $16,063.80 that she was going to receive, after her personal injury lawyer was paid, and other costs.

Importantly, Judge Isgur found that there was no explicit duty in the Bankruptcy Code for a debtor to report "post-petition" property, property such as the auto accident that is acquired during a bankruptcy case. He went on to find that even if there is such a duty, the debtor fulfilled it because her lawyers had properly filed papers with the court to get permission to be employed as special counsel, and later to get permission to settle the case, so creditors and other parties in the case had knowledge that she had an auto accident claim.

The chapter 13 trustee received the rest of the money from the auto accident, $5433.80, and this extra money was permitted to be paid to unsecured creditors. So the debtor's creditors get more of their claims paid back. In re Bratcher, Bankr. S.D. TX 2013.