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Can creditors take my personal injury settlement in NJ?
You have been through a very rough time financially since your accident happened. You have been unable to work due to the injuries, and now you are facing some debt collection activity while you are waiting for your case to finalize.
This is not uncommon.
You are probably wondering if any creditors can claim against your settlement.
The answer is yes and no. And this is a good thing.
Creditors who can claim against your settlement
Many medical care providers will place a lien against your settlement so that they can get paid for the services provided. This allows them to treat your injuries when you need the care without having to charge you.
Your attorney will account for these payments as part of your settlement, so you do not have to worry.
Medical bills that are not related to the accident or treatment of your injuries do not qualify for these types of medical liens. These bills will fall under your other creditors, such as credit card debts, car and personal loans, and mortgages. Your attorney will not approve a medical lien that is not related to the case.
Insurance companies that may have paid out some benefits to you already may lien against your settlement to recoup these payments when the case is settled. This standard procedure will also be accounted for in your settlement negotiations.
The only other people that can legally make a claim against your settlement are the IRS for back taxes or student loan payments that are behind.
No one else can make a claim against your settlement
All other creditors do not have access to your settlement prior to you receiving the payment And, if you handle it correctly, they cannot gain access to that money afterward as well.
How to protect your settlement funds
Settlement money is protected from creditors only if it is kept separate from your other money.
When you receive your settlement, place that check into a brand new checking or savings account, whichever you prefer to use. This is the only money you keep in this account.
Never place any other money into this account. If you make any deposits in this account, it will then become “mixed” with your other sources of income and will be accessible by bill collectors.
There are no restrictions on withdrawals or how you spend your money from your settlement account. However, it will always be in your best interest if you are going to use this money to pay any of your bills to take the money out of your account and deposit it into your standard checking account that you normally pay bills from. This will ensure that there is never any confusion about the accounts.
Your settlement is designed to help you overcome your losses
The reason that settlement money is protected is that it is meant to help you recover your losses. Allowing creditors to attach liens to the settlement that are not part of the case removes the protection this settlement is supposed to provide.
If you have any questions about protecting your settlement after you receive your payment, you are encouraged to speak with your attorney. Your lawyer will be able to provide you with the best legal advice on this subject.