Yes, in Tennessee, certain creditors can garnish a portion of your settlement money to cover your outstanding debts. However, they can’t just take your money out of your bank account without following the state law requirements, including getting a valid court order.
A Knoxville personal injury lawyer at Hotz & Associates, P.C. can take steps to protect your personal injury settlement, so it can be used to pay your medical bills and other expenses and preserve as much of the money as possible. Your lawyer can identify exceptions and provide advice for managing your money so you can use it as intended.
What type of debt is not exempt from garnishment?
If you owe money to the IRS for back taxes, the federal government may garnish your personal injury settlement to recover what’s owed. The IRS often has priority over other creditors. However, it isn’t the only creditor that may claim your compensation from a personal injury claim.
Your settlement may be used to pay:
- Health-related debts and medical expenses for treatment linked to the wreck
- Outstanding child support or alimony (handled through Knoxville family lawyers)
- Loans you took to cover living costs or care while you recovered
Other creditors, like a mortgage lender or credit card company, may petition the court. But most must wait behind the debts above.
What you can do to protect your settlement
Talk to your lawyer before signing any settlement agreement. They can explain which of your outstanding debts may be claimed and how to protect as much of your settlement money from garnishment as possible.
The agreement can specify the amount that covers personal injury damages such as medical bills, lost wages, or pain and suffering, some of which creditors can’t recover. Your attorney may also negotiate directly with creditors to reduce what you owe.
Avoid mixing your settlement with your regular bank account, since that can make the entire balance vulnerable to seizure.
In some cases, placing funds in a Special Needs Trust, set up by a Knoxville probate attorney, can help preserve your money for future medical expenses, home modifications, or caregiver needs. Properly constructed, these trusts keep your assets protected from creditor seizure.
Work with an experienced personal injury attorney to protect your settlement
If you have a pending personal injury case or have recently been hurt in a wreck, Hotz & Associates, P.C. can help you protect your settlement. The firm understands when Tennessee law allows your injury settlement to be garnished and how to structure it to preserve your recovery.
Contact Hotz & Associates today at (865) 582-0042 for a free consultation with a Knoxville car accident lawyer who can guide you through every step.