If you have been hurt on the job in Georgia and rely on weekly wage benefits from workers’ compensation you know that temporary total disability benefits payable per Georgia law will require you to downsize your standard of living. Sometimes the financial strain caused by your loss of a regular paycheck may lead you to consider Chapter 7 or Chapter 13 bankruptcy. What are the implications of pursuing bankruptcy while you are receiving workers’ compensation benefits?
My wife and law partner, Jodi Ginsberg, was recently questioned about this subject by a man who she is representing in a Georgia workers’ compensation case. This gentleman had been in a Chapter 13, but his case was dismissed after over 3 years when he got hurt and lost his regular income. Now that his Chapter 13 has been dismissed, one of his creditors has filed suit.
Jodi’s client wants to know if he should refile his Chapter 13 case to avoid having a judgment rendered against him. He is rightly concerned that a judgment creditor could seize his bank account and/or place a lien on his home.
Here is my take on this: while I think that a refiled Chapter 13 could work, I would be very reluctant to pursue this course of action. First, there is the practical question of whether Jodi’s client has enough disposable income to make a Chapter 13 work at all. I have not run the numbers in this case, but it would not surprise me if there is zero or negative cash flow in this prospective debtor’s budget – and a Chapter 13 will not work without some positive cash flow.
Second, our prospective client will not face any kind of garnishment of his workers’ compensation benefits as Georgia law protects weekly wage benefits from garnishment. I would think that this protection would extend to benefits even after they have been deposited into a bank account but I have not seen any statute or case law on this point – so, in my mind, a workers’ compensation claimant should be careful about depositing wage benefits into a (possibly) unprotected bank account.
Thirdly, I think that a Chapter 13 filed on behalf of a workers’ compensation claimant would be complicated and expensive. There is a strong likelihood that the case would become ripe for settlement at some point during the 3 to 5 year pendency of the Chapter 13. This means that the debtor’s counsel would need to file a motion to ask the court to declare the settlement as “exempt” property. Further, since a settlement means that weekly wage benefits will stop, the Chapter 13 would fail if the debtor could not come up with another source of income. Then, there is the possibility that the debtor might apply for Social Security disability.
The bottom line – as a debtor’s attorney, I see a filing by a debtor who is currently on workers’ compensation as a time consuming project and I would hesitate to accept such a case without a substantial retainer up front (not a likely prospect for debtor in such a situation).
This is one of these situations where multiple areas of law overlap with the amount of legal work needed greatly in excess of what a prospective debtor can afford.