Q: Can I file bankruptcy on a workers comp settlement loan in Illinois or is that type loan exempt from bankruptcy?
A: The Illinois Workers' Compensation Act prohibits any lien or assignment of proceeds. If you borrow money from a loan company while you have a workers' compensation claim, you are forming a contract, but there is no lien or assignment of the proceeds of the workers' compensation funds. The loan contract terms dictate that you will pay interest on the money you borrow and repayment of the principal and interest will take place when you finalize your workers' compensation case. Filing for bankruptcy to discharge this loan depends on the circumstances of the bankruptcy and it would be best to consult with your bankruptcy attorney. There is nothing in the workers' compensation act that discusses whether the loan can be discharged in bankruptcy.
Charles Candiano agrees with this answer
A: You are asking the wrong question, of the wrong people. You are asking people who are experts in Workers' Compensation law about bankruptcy law. The three big categories of debt which generally cannot be discharged in bankruptcy are as follows: Court-ordered child support; debt which involves fraud; and student loans. Your loan doesn't fall into any of those categories, but that is not your question.
What you really want to know is whether you would benefit/save money by filing bankruptcy and the precise logistics of the steps you need to take in the order in which those steps must be taken. It is imperative that you contact a bankruptcy attorney to get any meaningful answer to your question. Good luck.
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