The Status of the Personal Injury Award Exemption in Missouri
- Created: Friday, 30 January 2015 10:27
by Joe Harvath, Associate
Is your personal injury claim exempt from your bankruptcy estate under Missouri law? The answer to that question has recently changed from yes to no. Federal bankruptcy law allows states to “opt out” of federal exemptions and enumerate their own exemptions.
11 U.S.C. § 522. Missouri became one such state when it enacted its version of the “opt out” statute, Mo. Ann. Stat. § 513.427. The Eastern District Bankruptcy Court in Missouri interpreted the statute in In re Mitchell and determined that the statutory language permits Missouri residents to exempt from the bankruptcy estate any property that is not subject to attachment and execution by way of Missouri’s constitution, statute, or common law. In re Mitchell, 73 B.R. 93, 94 (Bankr. E.D. Mo. 1987). The Mitchell court held that the statute defines any property not subject to attachment and execution as exempt from the bankruptcy estate, including personal injury claims. Id at 94-95.
Later, the In re Barnes court, deciding the exempt status a debtor’s discrimination claim against a former employer, relied on Mitchell and broadened its holding when it determined that like physical injury, injuries to reputation or feelings are injuries to the person, and as such, are not assignable and are exempt from the debtor’s bankruptcy estate under Mo. Ann. Stat. § 513.427. In re Barnes, 177 B.R. 635, 637-639 (1995).
Bankruptcy courts in Missouri continued to follow the precedent set by Mitchell and find that personal injury claims were exempt from a debtor’s bankruptcy estate until the Eight Circuit Court of Appeals decided In re Benn. The court in Benn determined that Missouri’s opt-out statute served to allow only Missouri statutes to create bankruptcy exemptions, and it did not provide any exemptions itself nor did it allow exemptions to come from constitutional or common law. In re Benn, 491 F.3d 811, 814-815 (8th Cir. 2007). Accordingly, the court held that exemptions that were previously allowed under Mo. Ann. Stat. § 513.427 because they involved property that is not attachable, no longer apply, including the exemption for personal injuries. Id.
Despite Missouri’s public policy and long-standing precedent of allowing personal injury claims to be exempt from a debtor’s bankruptcy estate, the Eighth Circuit, in a more recent decision, noted that the Missouri legislature has had ample time to address the issue and amend the opt-out statute but has refused to do so. In re Abdul-Rahim, 720 F.3d 710, 714 (8th Cir. 2013). Furthermore, the same court noted that Benn’s decision serves as good and binding precedent in Missouri.
For additional information on this topic, or other legal matters, contact a local Personal Injury Lawyer at Mathias, Marifian and Richter, LTD., in Belleville or Edwardsville, Illinois.