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Are my workers’ compensation benefits subject to creditor claims?

by | Sep 20, 2015 | Chapter 7

Major challenges in life, including financial difficulties, often occur in “swarms.” For example, you may be among the many Americans who are just holding their own from paycheck to paycheck when you suffer an on-the-job injury that requires you to take time off from work to recover. You file for, and receive New Jersey workers’ compensation benefits, but typically the income replacement benefit does not equal what you were making on the job.

If your time away from work is long enough, and your debts large enough, you may find yourself faced with the prospect of having to seek relief through Chapter 7 or Chapter 13 bankruptcy. And that is when the question comes to you: “Are my workers’ compensation benefits something that my creditors can come after?”

Fortunately, New Jersey law has already anticipated, and answered this question in the negative. The applicable statutory section of the state’s workers’ compensation law reads as follows:

34:15-29. Compensation preferential lien; claim not assignable; set offs. Claims or payments due under this chapter … shall be exempt from all claims of creditors and from levy, execution or attachment.

Thus, if you need to avail yourself of bankruptcy protection, you can be safe in knowing that if you are relying on workers’ compensation benefits to help make ends meet until you can return to work again, those benefits will not be taken away.

If you have questions about what assets may be subject to creditor claims during a bankruptcy proceeding, a good source of information – and, as in this case, possibly reassurance – is to consult with a law firm that practices in federal bankruptcy law


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