Summary:
Around the time of the Confirmation of the Debtors’ plan, the Male Debtor was injured in a motor vehicle accident. Subsequently, he amended his schedules to disclose the personal injury claim and his exemptions to claim the d claimed the full $10,379.35 settlement as exempt property per N.C.G.S. § 1C-1601(a)(8). The Trustee failed to object to the exemption but did seek to have this amount determined to be disposable income.
Relying heavily on In re Graham, 258 B.R. 286 (Bankr. M.D. Fla. 2001), the bankruptcy court disagreed, holding that had “Congress intended ‘disposable income’ to include post-petition exempt personal injury proceeds, Congress could and should have explicitly said so in §§ 1306 and 1325. Further, § 522(c) states that “[u]nless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose . . . before the commencement of the case[.]”
Commentary:
As North Carolina allows an unlimited exemption for personal injury awards, unless the settlement included some actual lost wages (in excess of what had already been included in the calculation of disposable income), it is unlikely that an objection to the exemption would have succeeded.
Additionally, this opinion is more generally useful than just for exclusion of personal injury awards from disposable income. The Court could have more narrowly held that personal injuries are compensation for a loss, which is by definition not income.
For a copy of the opinion, please see:
Rouse- Exempt Personal Injury Award is not Disposable Income.pdf
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