How Bankruptcy Courts Handle Sexual Abuse Victim Compensation Funds

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After a person experiences sexual abuse, they may be eligible for compensation from Sexual Abuse Victim Compensation Funds. Federal funds exist for this purpose in addition to various state funds, depending on where you live. If you file for bankruptcy, these funds may be protected.

Under federal law, benefits or compensation from funds for crime victim reparations may be exempt from the bankruptcy process. A bankruptcy trustee may not seize these funds, nor may creditors try to get to them by taking legal action. State exemptions protecting these funds may also exist, but this depends on which state you live in, and they might not exist in every state. As such, you may need to elect only federal exemptions to take advantage of these protections.

Ask our sexual abuse lawyers for a free, private legal review by calling The Law Office of Andrew Shubin at (814) 826-3586.

What if You File for Bankruptcy While Receiving Support from the Sexual Abuse Compensation Fund?

An attorney can help victims of sexual abuse take advantage of funds set aside by the federal or state government for the benefit of crime victims. Sexual abuse victims may receive such funds, and they may need to protect those funds if they must file for bankruptcy.

Your compensation from any crime victim reparation funds, including those for sexual abuse victims, may be protected during bankruptcy. Bankruptcy trustees may be prevented from seizing these assets, and you may not be compelled to use them to pay your debts.

These protections may not be automatic, and you may need to assert these protections yourself when you file your bankruptcy petition with help from a lawyer.

Federal Bankruptcy Exemptions for Crime Victim Reparations

Bankruptcy exemptions allow petitioners to shield certain assets or accounts from bankruptcy. If exempted, bankruptcy trustees and creditors cannot seize the assets. The federal law carves out bankruptcy exemptions for benefits from crime victim reparation funds, such as those for sexual abuse victims.

Under this exemption, benefits from the Sexual Abuse Victim Compensation Fund may be exempt. Ideally, any money you received from a crime victim’s reparation fund should still be in your bank account by the end of your bankruptcy case, even if other assets are gone.

Can Your Sexual Abuse Victim Funds Be Seized?

After filing for bankruptcy, various accounts and assets may be at risk, depending on how you file. If you file under Chapter 7, accounts and assets may be seized by a bankruptcy trustee for liquidation. While exemptions exist that may protect certain assets from being seized, they do not apply automatically. You must specifically claim these exemptions in your initial bankruptcy petition.

In short, if you do not claim exemptions meant to protect compensation from crime victims’ reparations funds, they may be seized by a bankruptcy trustee. Talk to your attorney and make sure you claim the right exemptions before filing your petition.

State vs. Federal Bankruptcy Exemptions

The exemption that would protect sexual abuse compensation funds is a federal exemption. Depending on what state you live in, there might be no state exemptions that protect crime victim reparation funds, such as the Sexual Abuse Compensation Fund.

Many states require bankruptcy petitioners to choose either federal or state exemptions, and they may not select from both categories. Depending on your state, you may need to elect all federal exemptions to protect your Sexual Abuse Compensation Fund benefits.

Do Bankruptcy Courts Consider Sexual Abuse Victim Compensation Funds Income?

When a petitioner files for bankruptcy, the court must consider all sources of income. While income most often comes from employment, this is not the only form of income for many people. For bankruptcy purposes, income is defined broadly, and it may include Sexual Abuse Victim Compensation Funds.

This compensation may factor into things like a means test. To file for Chapter 7, petitioners must have a certain amount of debt relative to their income. People with a lot of debt but also too much income may not qualify for Chapter 7.

Your income also affects how we develop a payment plan under Chapter 13. The more income you have, the more you may be expected to pay each month under the plan.

Can You Use Crime Victim Funds to Pay Debts

We can exempt your funds from bankruptcy, so they are not seized by trustees or creditors. However, you may still use these funds to regain control over your financial situation. Whether you use these funds and how you use them is up to you.

Many people set these funds aside until their bankruptcy case is over. This way, they have some savings set aside to help them rebuild. Others may choose to use these funds to pay off as much debt as possible during the bankruptcy process so they can start over with a completely clean slate.

How Bankruptcy May Affect a Damages Award in a Sexual Abuse Lawsuit

If you were the victim of sexual abuse, our sexual abuse lawyers may help you file a civil lawsuit against those responsible, and you may receive a damages award. This award may represent a significant sum of money, and you may be able to protect it during the bankruptcy process.

Exemptions exist that protect proceeds from injury lawsuits and similar legal claims. You may exempt up to $31,575. If you did and you were awarded compensation, you may exempt some of it in addition to anything you receive from the Sexual Abuse Victim Compensation Fund.

Are There State or Federal Exemptions for Sexual Abuse Victim Compensation Funds?

There may be both state and federal exemptions for compensation from various crime victim reparation funds. In some states, there may only be federal exemptions available for such funds. Many states require bankruptcy petitioners to claim entirely federal or state exemptions, not both. As such, you might have to choose only federal exemptions if you wish to claim this exemption.

What Should You Do with Sexual Abuse Victim Compensation Funds During Bankruptcy?

If we can exempt these funds from bankruptcy, it may be entirely up to you what to do with them. You may use them to eliminate certain debts so that property, like a vehicle, is not repossessed. You might instead choose to set them aside as a sort of savings for when you begin rebuilding your finances after bankruptcy. An attorney can advise you on your options.

Should You Hide Your Sexual Abuse Compensation Funds During Bankruptcy?

No. You must disclose your assets to the bankruptcy court even if they are exempt and shielded from the bankruptcy process. Even if the bankruptcy trustee or creditors cannot seize your funds, they may still be considered part of your income, and the court needs to know about it.