Bankruptcy: In Re Ciara Minor

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U.S. Bankruptcy Court, Western District of New York

Bankruptcy

Personal Injury Proceeds — Settlement

In Re Ciara Minor
09-12095
Judge Bucki

Background: The Chapter 7 trustee seeks authorization to settle claims to the proceeds of personal injury litigation. He proposes to pay sums purportedly due under a pre-settlement finance agreement and to surcharge the debtor’s exemption for a portion of that payment. The instant motion presents issues regarding the enforceability of the finance agreement, both under state law and in the context of these bankruptcy proceedings.
Ciara Minor suffered injuries as a result of an automobile accident that occurred on Sept. 29, 2006. Consequently, she commenced litigation in state court to recover compensation for her injuries. While this action was pending, she entered into four separate agreements with an entity called Pre-Settlement Finance LLC.  Pursuant to these agreements, PSF advanced to Ms. Minor an initial sum of $12,500 in November 2007; the further sum of $2,500 in December 2007; the further sum of $3,000 in August 2008; and a final sum of $600 in December 2008. 
In consideration of these advances, Minor agreed that from the proceeds of her outstanding litigation, PSF would receive the total of its advances, together with processing fees of $875 and together with interest calculated at an annual rate of 42.5 percent. The parties agreed, however, that Ciara Minor would have no personal obligation to pay any sum other than from what she might recover from her personal injury action. Ciara Minor filed a petition for relief under Chapter 7 of the Bankruptcy Code on May 8, 2009, a date subsequent to her receipt of the four advances from PSF. In schedules filed with her petition, she disclosed the existence of her personal injury cause of action.

Ruling: The trustee’s motion seeks to approve a settlement that would repay all of the principal sums advanced by PSF, together with interest at the rate of 16 percent per annum for 21 months. The court finds that PSF possesses no lien that it can enforce against a bankruptcy trustee. Until such time as someone presents a reasonably convincing argument to support the existence of an enforceable lien, the court is unable to find that the proposed settlement falls within the range of reasonableness. Accordingly, the trustee’s motion to approve the proposed settlement with PSF is denied. Further, the motion to disallow the debtor’s claim of an exemption is continued until a final resolution of all interests in the personal injury settlement.

Harold P. Bulan of Bulan & Chiari, Horwitz & Ilecki LLP for the Chapter 7 Trustee; Joseph R. Bergen of Bergen & Schiffmacher LLP Special Counsel for the Chapter 7 Trustee; and Dennis Gaughan for the debtor