How much of his insurance settlement would he receive?
Three years ago a relative was injured severely in an auto accident that was not his fault. He has received no compensation to date – only some medical expenses(?). He is not able to earn an income due to his injuries. Somehow he negotiated an auto loan (with no income!) in which he has tens of thousands in negative equity. To date, he has been fronted money by his lawyer and I (pending a significant(?) insurance settlement), but I can not sustain continued support to the extent he has been getting. He tells me that If he were to apply for bankruptcy that all of his insurance settlement would be forfeited to the Licensed Insolvency Trustee. My question is: once all his debts have been paid, how much of his insurance settlement would he receive?
There is typically only a certain type of insurance claim that would be forfeited into a bankruptcy. Generally the amounts for ‘pain and suffering’ are not required to come into a bankruptcy. If the settlement is such that all of it is required to come into the estate, the funds would be used to pay the costs of administration to both the trustee and the federal government, any court costs that may arise as part of the bankruptcy, and up to the full debts plus 5% interest. Any funds after all of those have been paid, would be returned to your relative.