What Happens to my Personal Injury Claim if I Declare Bankruptcy?

A few potential clients we have talked to were thinking about filing bankruptcy or were in the process of filing bankruptcy when they were injured. Since there is no way to prevent yourself from being injured by someone else’s negligence, there are a few things you should know about bankruptcy and personal injury claims.

A personal injury claim is considered an asset to the injured party. Therefore, if you are in the middle of a personal injury claim and decide to file bankruptcy, the personal injury claim will become the property of the bankruptcy trustee; the bankruptcy trustee then becomes our client. The bankruptcy trustee will decide how the settlement will be distributed. They may choose to pay certain creditors such as credit card companies, mortgage holders or whoever else is involved in the bankruptcy claim and/or they may decide to give some of the settlement money to the injured party.

If someone is already in the process of a bankruptcy claim and they are injured in an accident and decide to wait to file a personal injury claim, that can cause other problems. We had a serious problem when a client of ours was called into bankruptcy court because the opposing counsel discovered they were in the process of filing bankruptcy when they got injured. The counsel did their research and noticed our client waited until after their bankruptcy claim ended to file a personal injury claim. The counsel’s insurance company wanted the personal injury claim moved to bankruptcy court so the client couldn’t avoid paying their bankruptcy claim. Our client got lucky and was able to avoid having their personal injury claim moved to bankruptcy court. That could have ended badly, and there wouldn’t have been anything we could have done for our client.

Moral of the story is to always be honest with your attorney. If you have a bankruptcy attorney, tell them if you’ve been involved in a personal injury claim. If you have a personal injury attorney, tell them if you have a bankruptcy lawyer. It is a lot easier for your attorney to represent you and get you the best possible outcome on your case if they have the whole truth.

If you have any questions about your personal injury case and a bankruptcy claim, please feel free to reach out to us. You can call us at 407-565-7386 or text us at 407-644-4444. We are always happy to offer a no obligation, free consultation to discuss your case with you.