Workers’ Compensation Award and Filing Chapter 7 Bankruptcy

As explained in previous blogs, exemptions are broken up into two sections, California Code of Civil Procedure §703 and §704. Both have similar exemptions for things like household goods and the like. The catch is a debtor must choose between the exemptions at California Code of Civil Procedure §703 or the exemptions at California Code of Civil Procedure §704. It’s one or the other…. But never both. Most of the time it’s the choice between the Wild Card Exemption and the Homestead Exemption.

What happens to a Workers’ Compensation Award when filing Chapter 7 Bankruptcy? Asked another way, is my Workers’ Compensation Award protected when I file Chapter 7 Bankruptcy? The answer is maybe.

If you are using the exemptions at California Code of Civil Procedure §703 then the award would likely be protected pursuant to California Code of Civil Procedure §703.140(b)(10)(C) which protects a “debtor’s right to receive…A disability, illness, or unemployment benefit. At least this is what the Central District Court says…. “Workers’ compensation benefits are generally treated as disability benefits and thus exempt without regard to amount or whether the award is necessary for the support of the debtor (or debtor’s dependents).” This interpretation is not binding in other districts, but it is compelling for the application of the exemption to a Workers’ Compensation Award. Of course, under California Code of Civil Procedure §703 you always have the wildcard exemption as well.

If you are using California Code of Civil Procedure §704 then it’s protected under California Code of Civil Procedure §704.160(a) which states “a claim for workers’ compensation or workers’ compensation awarded or adjudged is exempt without making a claim.” However, those funds are subject to satisfying a support judgment or past due support.