Kentucky residents who are injured in car accidents after they have had Chapter 13 repayment plans confirmed might want to know about an August case. The U.S. Bankruptcy Court for the Western District of Louisiana held on Aug. 5 that the debtor's portion of car accident settlement awards are assets of the bankruptcy estate.

A man who had his plan confirmed had a car accident three years later, and he was injured as a result. His attorney was able to negotiate a settlement of $196,845. Out of that total, the debtor stood to receive $74,067. The bankruptcy court trustee then proposed a modified plan calling for $11,359 from the debtor's settlement portion to be paid into the bankruptcy court. The man objected, arguing that he needed the entire amount to pay for his ongoing living expenses and medical costs related to the accident.

The bankruptcy court sided with the trustee. Using a test called the best interests of the creditor, the court found that the man was required to pay in the amount that was outstanding to his creditors before receiving the balance from his settlement. The court also said it would have taken into account evidence supporting the man's claimed need for living expenses and medical costs, but the man failed to submit any supporting evidence for the court's consideration.

Chapter 13 offers a way for people who have a steady and reliable source of income and who otherwise qualify under the chapter to hold on to their property while paying off indebtedness over a three-to five- year period. An attorney can describe the requirements during an exploration of other forms of debt relief that may be available.