Disability Proceeds: Protection of Single Large Distribution

Florida statutes exempt disability payments from creditor levy. A caller asked if a lump sum disability payment is protected once deposited into the debtor’s bank account. The Florida protection of disability payments most often is applied to exempt from garnishment continuous periodic payments under a disability income policy. The express language in Florida statutes does not protect proceeds of disability policies after receipt. I do not think that a lump sum disability payments would be protected after having been deposited in the debtor’s bank account

The debtor eligible to receive a disability settlement might find protection by depositing the disability payment in another protected asset. The debtor could defend fraudulent transfer claims by stating that the money was exempt until its deposit in which case the debtor has the discretion to transfer or convert the money to any person or any alternate asset.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida