As a general rule, because the structured settlement payments arise out of claims for “personal injuries”, or “wrongful death” actions, they are given a special status, tax treatment, and are generally exempt and protected from almost all creditors. For example:
(1) The payments are “tax free” to the injured party or their heirs;
(2) The payments ARE exempt from being attached or garnished to pay off liens, judgments, and MOST all other obligations that may come up against the recipient of the payments;
(3) This exemption also often extends into bankruptcy, where in most cases,not even a bankruptcy trustee can take the structured settlement payment stream to pay off creditors, in the event an injured person files for bankruptcy.
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