If you are expecting a personal injury settlement or if you expect to receive a favorable jury verdict for your personal injury lawsuit, there is good news. Personal injury settlements or awards are generally considered exempt under garnishment laws. Similarly, personal injury settlements are usually not taxable at either the federal or state level but ask your personal injury attorney for clarification.
Many people ask whether or not the federal government can actually go into their bank account in an effort to recover money owed through student loans. In general, the federal government does not have the power or the resources to actually levy bank accounts or go after other assets. The federal government typically sticks to garnishing wages or going after tax refunds when they want repayment of their student loan money. This means that your personal injury settlement should remain safe from student loan repayment issues.
However, if you do owe student loans, it would not be a bad idea to open a separate bank account to keep your personal injury settlement money in. This could help clear up any confusion about what money came from wages and what money came from the settlement.