After you make a successful workers’ compensation or personal injury claim, you might have a large chunk of money coming to you. Lots of our clients ask whether or not they have to pay taxes on these awards, or whether bankruptcy will affect their compensation. We’ve laid it all out for you below. Check it out!
Do I have to pay taxes on my personal injury settlement?
According to IRS regulation 1.104-1, your personal injury settlement is tax-free. In fact, there’s not even a place on your tax return to put that compensation. So the answer is no. You do not have to pay taxes on your personal injury settlement.
Do I have to pay taxes on my workers’ compensation settlement?
According to IRS regulation 1.104-1, your workers’ compensation settlement is tax-free. In fact, there’s not even a place on your tax return for that compensation to go, so the answer is no, you do not have to pay taxes on your workers’ compensation settlement.
Will my personal injury settlement be taken if I file bankruptcy?
If you have a personal injury case pending and you’re thinking about filing bankruptcy, you should know that your personal injury settlement could be at risk in a bankruptcy proceeding.
There are two different kinds of bankruptcy. If you file a chapter 13 and your plan is less than 100% repayment, then the chapter 13 trustee could look to your proceeds. Also in a chapter 13, your personal injury settlement could be exempt.
If you have a chapter 7, which is a liquidation bankruptcy, the chapter 7 trustee will likely look to your proceeds to pay some of your creditors. You should make sure to tell your personal injury lawyer that you’re contemplating or have filed a bankruptcy proceeding so that he can work with your bankruptcy lawyer to adequately protect your interests.
If you’ve been hurt at work, call Rocky McElhaney Law Firm at 615-425-2500 or reach out at RockyLawFirm.com. We have offices in Nashville, Hendersonville and Knoxville, and fight on behalf of the injured throughout Tennessee. Contact us today to learn how we can help you.
Nashville personal injury attorney Rocky McElhaney represents people who have been injured in car, truck and other automobile accidents as well as many other forms of negligence throughout the state of Tennessee.