The circuit court in Illinois referred a case for consideration to the Illinois Supreme Court to decide if a workers’ compensation settlement can be exempt from a bankruptcy petition.

Elena Hernandez filed a Chapter 7 bankruptcy petition in December 2016 and hoped to list her workers’ compensation claim as exempt. Her workers’ compensation claim was settled two days after her bankruptcy filing and was valued at about $31,000. She owed almost $136,000 total to three healthcare providers who treated her for her work-related injuries, and the healthcare providers said they should be able to reach workers’ compensation awards for unpaid bills based on a 2005 amendment to the Illinois Workers’ Compensation Act. She was initially denied her exemption in a bankruptcy court and she appealed but the denial was also upheld by the U.S. District Court for the Northern District of Illinois in Chicago, they determined that “using the workers’ compensation exemption to thwart this specific class of creditors would frustrate the Act’s purpose.” The 7^th U.S. Circuit Court of Appeals declined to rule, instead certifying the question to the Illinois Supreme Court.

The Illinois Supreme Court is now tasked with the statutory interpretation of whether the Act allows provider creditors to claim the proceeds or settlement of a workers’ compensation claim.

The Circuit Court determined that after a claim is settled, a provider may seek collection from the employee capped at the fee schedule price ceiling if the case is compensable but ruled that payment for non-compensable services is the responsibility of the employee. They conceded that the Act never said which assets were available to healthcare providers who hoped to collect. They did not have an opinion from the Supreme Court clarifying the boundaries of the act.

The question of whether the amendment exempted the proceeds of a workers’ compensation settlement from the claims of medical-care providers who treated the injury associated with that claim is certified.

Read the court case here and read more here.