In re: Elena Hernandez

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604

February 11, 2020

Before

DIANE P. WOOD, Chief Judge

DIANE S. SYKES, Circuit Judge

MICHAEL Y. SCUDDER, Circuit Judge

No. 18-1789

IN RE:

ELENA HERNANDEZ,
Debtor-Appellant.

Appeal from the
United States District Court for the
Northern District of Illinois,
Eastern Division.

No. 17 CV 3230

Jorge L. Alonso,
Judge.

O R D E R

This bankruptcy appeal raises a single question of state law. Elena Hernandez
had only one sizable asset when she filed her Chapter 7 petition: a pending workers’
compensation claim, which she valued at $31,000. She listed the claim as exempt under
section 21 of the Illinois Workers’ Compensation Act, 820 I
LL. COMP. STAT. 305/21
(applicable via 11 U.S.C. § 522(b)), and she settled it two days after filing for
bankruptcy. In re Hernandez, 918 F.3d 563, 565 (7th Cir. 2019).

Hernandez’s creditors include certain healthcare providers who treated her
workplace injuries; they objected to the claimed exemption. The bankruptcy judge
denied the exemption, and the district judge affirmed. Id.

No. 18-1789 Page 2

Hernandez’s appeal turns on an important but unsettled question of state law
concerning the effect of certain 2005 amendments to the Illinois Workers’ Compensation
Act. So on March 18, 2019, we certified the following question to the Illinois Supreme
Court:

After the 2005 amendments to 820 I
LL. COMP. STAT. 305/8 and the
enactment of 305/8.2, does section 21 of the Illinois Workers’
Compensation Act exempt the proceeds of a workers’ compensation
settlement from the claims of medical-care providers who treated the
illness or injury associated with that settlement?

Id. at 571. The court accepted the certification.

On January 24, 2020, the Illinois Supreme Court answered the certified question
in the affirmative:

Notwithstanding the 2005 amendments to section 8 of the Act (820 ILCS
305/8 (West 2016)) and the enactment of section 8.2 of the Act (id. § 8.2),
section 21 of the Act (id. § 21) does exempt the proceeds of a workers’
compensation settlement from the claims of medical-care providers who
treated the illness or injury associated with that settlement.

In re Hernandez, No. 124661, 2020 WL 398783, at *6 (Ill. Jan. 24, 2020). That authoritative
holding of the state supreme court is dispositive. The proceeds of Hernandez’s workers’
compensation settlement are exempt from the claims of the healthcare providers who
treated her workplace injuries. The contrary rulings of the bankruptcy and district
courts rest on a flawed interpretation of state law. Accordingly, the judgment must be
and hereby is

REVERSED.