The chapter 7 debtor was not entitled to exempt the portion of a settlement he negotiated with his employer and worker’s compensation insurer where that amount was in a trust for the benefit of his medical care providers and, therefore, did not become part of the bankruptcy estate. Ryan v. Branko PRPA MD, LLC, No.21-449 (E.D. Wisc. March 2, 2022). Read More
Tag Archive: workers’ compensation
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Debtor May Not Exempt Portion of Worker’s Comp Order Earmarked for Medical Care Providers
Posted by NCBRC - March 23rd, 2022
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Illinois Workers’ Comp Settlement Proceeds Exempt
Posted by NCBRC - January 28th, 2020
Answering a question certified to it from the Seventh Circuit Court of Appeals, the Illinois Supreme Court held that, under Illinois law, “the proceeds of a workers’ compensation settlement are still exempt from the claims of medical-care providers who treated the illness or injury associated with that settlement,” notwithstanding 2005 amendments to the Workers’ Compensation Act. In re Hernandez, 2020 IL 124661 (Sup. Ct. Ill. Jan. 24, 2020). The Seventh Circuit found “that authoritative holding of the state supreme court is dispositive. The proceeds of Hernandez’s workers’ compensation settlement are exempt from the claims of the healthcare providers who treated her workplace injuries.” In re Hernandez, No. 18-1789 (7th Cir. Feb. 11, 2020).
Elena Hernandez filed for chapter 7 bankruptcy owing over $120,000.00 in medical bills incurred for treatment of work injuries. In her bankruptcy schedules she listed a pending workers’ compensation claim. Shortly after filing her petition, and without consulting the bankruptcy trustee, Ms. Hernandez settled the workers’ compensation claim with her employer for approximately $30,000.00. Ms. Hernandez maintained that, under the state Workers’ Compensation Act (WCA), the settlement was exempt from liability to creditors. Her medical creditors objected to the exemption arguing that 2005 amendments to the Illinois exemption law had made such settlements accessible to health care providers. The creditors also argued that the settlement was the product of fraud.
The bankruptcy court sustained the objection on process grounds rather than on application of the Illinois exemption. Affirming, the district court relied on its interpretation of the 2005 amendments to the state WCA. On appeal to the Seventh Circuit, (case no. 18-1789), that court determined that both sides offered seemingly valid interpretations of the exemption statute. It certified the question to the state supreme court. Read More
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7th Circuit Certifies Workers’ Compensation Exemption Question to Illinois Supreme Court
Posted by NCBRC - March 27th, 2019
The Seventh Circuit Court of Appeals has certified a question to the Illinois Supreme Court concerning “whether the Illinois Workers’ Compensation Act [IWCA], as amended, allows care-provider creditors to reach the proceeds of workers’ compensation claims.” In re Hernandez, No. 18-1789 (7th Cir. March 18, 2019). Read More
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