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A personal injury settlement is not disposable income in Chapter 13

In the case of Connor v. Carroll, Case No. 12-1139 (6th Cir., 1/15/13)(unreported), the Sixth Circuit Court of Appeals based in Cincinnati, held that proceeds from a personal injury claim which was pending at the time of the filing of the debtors’ chapter 13 bankruptcy could not be deemed disposable income under 11 USC §1325(b) because the funds were “neither known nor virtually certain at the time of the confirmation of the plan. . .”

This is good news for individuals filing chapter 13. While personal injury proceeds are generally considered “property of the estate” when received, the income from a personal injury settlement cannot form the basis for an increase in monthly chapter 13 plan payments under this ruling.