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Montgomery & Bucks County Workers' Compensation Law Blog

Wednesday, January 28, 2015

Bankruptcy Judge Shielded Workers Compensation Settlement

Can workers compensation settlement and Medicare set-aside account funds be used for expenses other than medical treatment?

A worker broke his hip and settled the workers compensation claim related to the injury for $225,000 in workers compensation benefits and $72,742 placed into a Medicare set-aside account for future medical treatment. The worker used those funds to purchase real estate in York, Pennsylvania, and a new truck

About two years after the purchases, when filing for Chapter 7 bankruptcy protection in U.S. Bankruptcy Court in Wilkes-Barre, the worker asked for the properties, truck and remaining funds from the workers compensation settlement to be exempted from the proceedings. Despite objections by the trustee in the bankruptcy case, the judge exempted everything as requested by the worker.

The judge found that the settlement funds were reasonably necessary to support the worker’s family. The worker was unemployed, his wife had a low-earning job, and two of their three children were under 18. While the worker was receiving some income from his brother, the judge found it to be modest.

One of the worker’s real estate purchases was a parcel of property that the worker sold to his brother under an installment payment agreement. The worker did not disclose that agreement to the bankruptcy court. Still, the judge determined that the income had only a negligible impact on the worker’s bankruptcy case and did not have to be included as an asset.

The Medicare set-aside fund was not included in the bankruptcy proceedings because it was intended for medical expenses, although the worker did not use it for that purpose.

The attorneys at Louis P. Lombardi II & Associates are experienced in handling all types of workers’ compensation claims. We service the areas of Philadelphia and Montgomery and Bucks County, Pennsylvania. Contact us at (610)239-7600 for a consultation today.


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