Will I lose the insurance settlement?

There is a possibility that you would lose this settlement once you file for bankruptcy, at least in part, depending on a few factors. The Trustee would look at the period of time the income represents, the amount of your income currently and on a go forward basis as well as the nature and amount of the settlement. If this settlement represents loss of income then it would be treated as such under the Bankruptcy and Insolvency Act and then a portion would more than likely be required to be contributed to the bankruptcy estate.

Depending on the amount of the settlement and the amount of your debt, you may be able to file a consumer proposal instead, which will offer the creditors a portion of these funds rather than the entire amount. A consumer proposal is making an interest free settlement with the creditors and it offers you the same legal protection from collection activity as a bankruptcy does. This may be a better solution but it would require you to attend a free consultation with a licensed trustee to make sure that it would work in your situation.