Personal Injury Newsroom

Personal Injury Law Suit Proceeds Estimated At $6,000

She also declared those proceeds exempt. Trustee Pierce thereafter filed an objection to Debtor's claimed exemptions on the grounds that Debtor had exceeded by $4,675 her allowed exemptions under S.D.C.L. § 43-45-4. Debtor filed a response asking that a hearing be held to determine how much of the $6,000 in the law suit proceeds she could keep.

A hearing was held. The Trustee reported that the parties had reached a settlement. A written stipulation was filed. It provided that Debtor could keep the first $2,750 of any personal injury lawsuit proceeds she received. The balance would go to the bankruptcy estate.

Trustee Pierce noticed the settlement for objections. Dr. Van Hemert filed a letter objection. (1) He said Debtor, before she filed bankruptcy, assigned any personal injury law suit proceeds to his office up to the amount of the debt she incurred there. He cited a state court decision in support of his contention. Attached to Dr. Van Hemert's objection was a copy of document entitled Assignment of Proceeds. The document provided that Debtor had agreed to "IRREVOCABLY SELL, ASSIGN, TRANSFER AND SET OVER TO VAN HEMERT CHIROPRACTIC OFFICE all my rights, title, and interests in and to any settlement, judgment, or recovery from State Farm-Insured James [illegible] S R claim # 46-0062-001 to the extent of any unpaid chiropractic charges owed by [Debtor] to Van Hemert Chiropractic Office." The agreement included a similar provision in which Debtor sold, assigned, transferred and set over to Dr. Van Hemert any insurance policy proceeds "which indemnifies the above-named person in the event of such settlement judgment or recovery . . . or which provides coverage for [Debtor]." The agreement also provided:

IN CLARIFICATION OF THE FOREGOING, it is hereby agreed that [Debtor] shall at all times remain the real party in interest in the said claim or lawsuit, and no such rights to a cause of action shall inhere to the Van Hemert Chiropractic Office as a result of this assignment. Van Hemert Chiropractic Office's interest in the proceeds is the equivalent of an equitable assignment, lien, or other security arrangement confined solely to the unpaid balance of its charges for chiropractic services rendered in treatment of the patient for matters related to the personal injury suffered by the patient at the hands of a third party tortfeasor. This is not an assignment of a cause of action in personal injury. Any construction of this document as an assignment of a cause of action shall render this assignment unenforceable to that extent as between the patient and Van Hemert Chiropractic Office and any such unenforceability shall not affect the security interest created hereunder. [Emphasis added.]

Attached to the agreement was a copy of a notice acknowledging the agreement, but the party to whom the notice was given is illegible.

A hearing on Trustee Pierce's motion to approve the settlement and Dr. Van Hemert's objection was held. At the hearing, Dr. Van Hemert stated that the relevant insurance company, State Farm, had received notice of the agreement. He said he was owed $6,075.11. Trustee Pierce acknowledged she has received $3,794 in settlement proceeds. She argued that the pre-petition agreement between Debtor and Dr. Van Hemert did not completely transfer Debtor's interest in any lawsuit or insurance proceeds but merely gave Dr. Van Hemert a security interest in them to the extent of his unpaid bill.