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Collecting Workers' Compensation Claims After Bankruptcy

Posted on in Bankruptcy

Collecting Workers' Compensation Claims After BankruptcyWhen can a creditor claim a workers’ compensation award from a debtor who has filed for bankruptcy in Illinois? That question is at the heart of a recent case that is heading to the Illinois Supreme Court. In the case of In re Elena Hernandez, the debtor filed for Chapter 7 bankruptcy. Among her debts were more than $100,000 that she owed to healthcare providers for treating a work-related injury. She claimed a bankruptcy exemption for her $31,000 workers’ compensation settlement. The healthcare creditors contested the exemption, stating that it unreasonably undermines their ability to collect on the debt. Both the bankruptcy court and a circuit court agreed with the creditors, but the appellate court saw enough evidence on both sides of the argument to ask Illinois’ highest court to make a definitive ruling.

Workers’ Compensation and Debt

A workers’ compensation claim is meant to cover the actual cost of an employee’s work-related injury, including:

  • Healthcare provider expenses;
  • Missed pay from time off work; and
  • The loss of earning potential due to disability.

Thus, one of the primary purposes of workers’ compensation is to ensure that healthcare providers are paid for their services. Illinois law requires employers to directly pay providers for all undisputed healthcare bills. Employers may dispute whether an employee’s injury qualifies for workers’ compensation or whether a certain treatment was a necessary expense. Creditors can hold a patient liable for payment when the employer disputes a bill.

Bankruptcy

Illinois’ bankruptcy laws do not include an exemption for workers’ compensation awards. Instead, the presumed exemption comes from the Illinois Workers’ Compensation Act, which states that workers’ compensation benefits are not subject to liens or garnishment. The law also states that healthcare providers may collect from a patient after the workers’ compensation claim has been settled. Bankruptcy courts have interpreted this as an exemption against general creditors but not healthcare providers. In the case of In re Elena Hernandez, the appellate court wants the supreme court to clarify the Illinois Workers’ Compensation Act by answering:

  • Whether the law creates a bankruptcy exemption for proceeds from a workers’ compensation claim; and
  • Whether the law also includes an exception to the exemption for healthcare providers seeking repayment.

Contact a Chicago Creditors’ Rights Attorney

The Illinois Supreme Court’s ruling could affect how healthcare creditors are able to collect debts from their patients. A Chicago debt collection lawyer at Walinski & Associates, P.C., can help you receive compensation after treating a patient with a work-related injury. Schedule a consultation by calling 312-704-0771.

Source:

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2019/D03-18/C%3A18-1789%3AJ%3ASykes%3Aaut%3AT%3Aop%3AN%3A2310184%3AS%3A0

Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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