Suppose that you lost your finger in a work related accident. You filed a worker’s compensation claim for that, then you filed a Chapter 7 bankruptcy. A day after you file your bankruptcy, you receive $193,000 as your worker’s compensation payment. In your bankruptcy petition you exempt your worker’s compensation claim pursuant to Section 522(d)(10)(C) and (d)(11)(E). These two provisions of the bankruptcy code exempts the debtor’s right to receive “a disability, illness, or unemployment benefit;… a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.” The trustee objects to your claim of exemption. Who is correct?

In Re Dang, the Chapter 7 debtor lost his finger and part of his hand in a work related injury on February 16, 2011. On September 6, 2011, a redemption agreement was entered into by the debtor, his employer, and his employer’s insurance carrier. The agreement said that the debtor got injured, a dispute existed, and that the parties settled the dispute for a lump sum payment of $193,143.60 with $173,679 going to the debtor. A redemption order was entered that same day becoming final 15 days later. Debtor filed for Chapter 7 relief on October 3, 2011. His original schedules listed the value of his worker’s compensation claim as “unknown.” He said he received his settlement check on October 4. The debtor subsequently amended his Schedule B to reflect the actual settlement amount. He also amended Schedule C to exempt the entire amount of worker’s compensation funds received under Section 522(d)(10)© and (d)(11)(E). Naturally, the trustee objected to debtor’s claim of exemption arguing that “its just a finger… a lot of people get around with four fingers on one hand, and he still has five fingers on the other hand, that makes a total of nine fingers.”