Bankruptcy and a Maryland Workers’ Compensation Award

| | | April 11th, 2016

If you have a Workers’ Compensation case and need a bankruptcy — seek the help of a bankruptcy attorney.  Don’t go it alone.  An argument is being made that a workers’ comp award should come in the estate based upon “bad faith” in a Chapter 13.  Here are some reasons why its a bad argument:

A Workers’ Compensation award is exempted for the purposes of bankruptcy pursuant to the labor and employment section of the Maryland Code (9-732).  Many people think that a temporary total check under the Workers’ Comp statute is the same thing as “wages”.  As such, they wrongly concluded that the compensation
is a non-exempt asset. They are wrong. Further evidence of this is found under the annotated code of Maryland which discusses compensation and disability payments. Citing 9-602, case law clearly states that temporary total is based on a formula and not actual wages. Miller v. Western Elec. and Jung. Southland.

Additional proof is found by looking at 9-621 Payment of Compensation. The workers’ comp statute does not use the word “wages” is uses the word compensation. The employee will be paid 2/3 of the average weekly wage. And, case law clearly states that average weekly wage is a temporary disability compensation (not a wage).
Miller v. James McGraw – disability has reference to wage earning disability or loss of wage-earning capacity, and payments are to be made on that basis.  Under 9-627, Duration of compensation, if a covered employee is entitled to compensation for a permanent partial disability . . . (and then a formula) — more proof that the code does not call a workers’ comp award “wages.”  And even if none of that were true, Courts and Judicial Proceedings 11-504(b)(2) says that the compensation is exempt:  “money payable in the event of sickness, accident, injury, or death of any person, including compensation for loss of future earnings.”
Just like everything in law, there are some lawyers trying to make these payments come into the bankruptcy estate based upon the argument of “bad faith.”  Therefore, always consult of lawyer when contemplating a bankruptcy and you have a workers’ compensation award in your near future.