After receiving a settlement award from your personal injury claim, you may wonder if it can be taken to pay debts like student loans. Let’s take a look at whether Florida permits personal injury settlements to be garnished and provide some helpful tips for protecting your settlement money.
If you have more questions about your settlement, a Florida personal injury lawyer with Lytal, Reiter, Smith, Ivey & Fronrath can help you. Call (561) 655-1990 today to schedule a free consultation.
Student loans and personal injury settlements
Garnishment is one way a creditor can recoup a debt by seizing money from your bank account or paycheck to settle the debt.
How and if your student loan lender can garnish your paycheck or other funds depends on the type of loan you have. Many people have federal student loans, and yes, while it’s true that federal student loan lenders can garnish your paycheck or tax return, it’s very unusual for the lender to go after a personal injury settlement.
That being said, if you do owe student loans, you may wish to keep your settlement in a separate bank account so that there’s no question about which account contains wages (which can be garnished) and which contains your personal injury settlement (which can’t be garnished).
If you’re self-employed, then you may not have wages to garnish, but the Department of Justice could sue for defaulted federal student loans to collect the money. You may have to use your settlement award to pay that debt.
Factors affecting student loan debt collection from personal injury settlements
Florida Statute 222 provides certain asset exemptions from garnishment. If you keep up with your student loan payments, the lender cannot seize your personal injury settlement to pay off the balance, so be sure not to fall behind on payments.
Protecting your personal injury settlement from student loan debt collection
There are a few steps you can take to protect your personal injury settlement award from student loan lenders and other creditors:
- Separate the settlement from other funds. Start a separate bank account for the settlement and pay any accident-related expenses from that account.
- Save all your paperwork from the personal injury claim, including the settlement documents and all bills, invoices, and receipts. This creates a paper trail in case a dispute arises (this is likely to happen).
- If you need money for an emergency or plan to use the settlement money to pay bills or other expenses, load funds from that account onto a prepaid debit card or transfer the amount you need into a different account. This preserves your settlement account so creditors cannot access it but allows you to spend your money as needed.
- You may also consider placing the settlement money in a trust, which offers even more protection than a traditional bank account. Your Florida personal injury lawyer may be able to give you referrals to financial advisors who can help you establish a trust and give you other pointers for protecting those funds.
If you’ve fallen behind on your student loan payments, don’t wait for the debt collectors to come knocking on your door. Speak with the lender and arrange a repayment program or a forbearance to prevent your account from sliding into collections.
Do you need help protecting your settlement award from your lenders?
If you were harmed in an accident caused by someone’s negligence, or if you’re pursuing a personal injury settlement and need legal advice, we can help. Lytal, Reiter, Smith, Ivey & Fronrath offer professional personal injury representation across the state of Florida.
We can help you negotiate a favorable settlement and provide tips on taking care of your money afterward. Contact us today at (561) 655-1990 for a free consultation.