The Debtor purchased real property and a vehicle with funds received from a personal injury settlement and claimed such property as exempt under N.C.G.S. § 1C-1601(a)(8), which allows an unlimited exemption for personal injury awards and settlements. The Trustee and First Bank objected.
The bankruptcy court held that despite the liberal interpretation of exemptions in favor of debtors, that the debtor could not extend the personal injury exemption to property traceable from such funds. N.C.G.S. §1C-1601(d) specifically allows for the exemption of funds traceable to the sale of exemption funds related to a motor vehicle, household goods, tools of the trade or the wild card, but not other exemptions.
That personal injury attorneys should advise their clients about the timing of a bankruptcy, such that any recovery can best be protected, is a repeated complaint on this blog.
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