One of the most daunting parts of filing for bankruptcy is the possibility that the bankruptcy trustee will require you to sell some of your property in order to pay off your creditors. Thankfully, Nevada bankruptcy law has a series of exemptions that allow you to essentially mark certain pieces of property off-limits for your creditors.
One of the exemptions that does not get a lot of attention is the personal injury settlement exemption. Under Nevada law, you are allowed to exempt up to $16,500 of a personal injury settlement. For the exemption to apply, you must settle an injury claim prior to the filing of your bankruptcy. While these settlements typically stem from the filing of a lawsuit, there is no requirement that a lawsuit was ever filed to take advantage of the exemption.
But what happens if you settled two separate personal injury claims shortly before your bankruptcy? Is the $16,500 exemption available for each claim, or does that exemption amount apply across all of your various injury awards? The Nevada Supreme Court answered this question in 2016.
Kaplan vs. Dutra
In the case of Kaplan vs. Dutra, a chapter 7 debtor settled two separate, unrelated personal injury claims shortly before filing for protection under chapter 7 of the bankruptcy code. Both settlements were each for approximately $16,150. When the debtor claimed two exemptions – one for each claim – The chapter 7 trustee objected. According to the trustee, the $16,500 exemption was intended to be applied to the total dollar amount of all injury claims combined.
After considering Nevada's statute, the Supreme Court sided with the debtor in this case. The court held that the statute was vague and that it was unclear from the legislative record what the original intent of the bill was. The Supreme Court based their decision on “reason and public policy,” holding it was the tradition of the court to construe exemptions in favor of the debtor.
In the decision, the court was quick to point out that if you are recovering from multiple injuries it is likely to take you much longer to be healthy enough to get back work. It is this extended recovery period that led the Nevada Supreme Court to rule that the personal injury exemption should be applied on a per-claim basis.
Discuss Your Bankruptcy Exemption Options with a Las Vegas Bankruptcy Attorney
The personal injury settlement exemption is only one of the many exemptions available to you under Nevada law. The sheer volume of exemptions potentially available in your bankruptcy case can be overwhelming. That's why it is helpful to have an experienced Nevada bankruptcy attorney by your side. An experienced attorney has the training to spot potential exemptions in your bankruptcy estate that you might not have been aware of.
Attorney Rory Vohwinkel has been helping Nevada debtors get the most out of their bankruptcy case for years. Rory understands Nevada exemptions and can help explain the finer details to you. To discuss your case, contact Vohwinkel Law for a free consultation today.