personal injury lawyerNot everyone realizes that when you file bankruptcy and you have a personal injury claim pending, the bankruptcy case can have a significant impact on your personal injury claim.  That is basically because a personal injury claim is treated as an asset.  So, when you file a bankruptcy petition under Chapter 7, for example, you are transferring all of your assets to the Trustee in bankruptcy.  So, how does a personal injury lawyer handle bankruptcy when a personal injury claim is pending?

What happens to legal claims in bankruptcy?

Once your bankruptcy petition has been filed and your personal injury claim has been added as an asset, your bankruptcy trustee will need to decide whether to abandon the claim or allow you to continue to pursue it.  For this reason, you need to disclose the existence of the claim to your bankruptcy lawyer, as well as disclose the bankruptcy to your personal injury lawyer.

The effect of bankruptcy on medical expenses in personal injury claims

Any medical bills you have incurred as a result of your personal injury are subject to discharge in bankruptcy court.  That means that those expenses will effectively be forgiven and you will no longer be required to pay them.  That could have a very big impact on whether or not you can claim those expenses as damages in your personal injury case. In some states, you may still be able to offer the medical bills as evidence of the severity of the injury although the bills themselves may not be a basis for compensation.

Compensatory damages in personal injury claims

In most car accident cases, the primary component of damages is medical expenses incurred as a result of an accident.  Reimbursement for medical treatment basically includes compensation for treatment already received, as well as the estimated costs of any medical care that may be required in the future.  Additionally, the injuries suffered can have a substantial impact on the victim’s ability to return to work, either temporarily or permanently.  In that case, damages may include future income.

How much can you recover for damages?

The amount of compensation you may recover after a car accident depends on the type of damages you suffered.  Each claim is different, both factually and with regard to which laws apply to your claim.  The most important element used in determining the value of a car accident claim is the nature and seriousness of your injuries.
What happens if the defendant files for bankruptcy?
This is typically not good news for a personal injury lawyer.  In most cases, a civil lawsuit is subject to an automatic stay when bankruptcy is filed.  That means as soon as the bankruptcy case is filed, you cannot continue the lawsuit.  The only way to do so is to ask the bankruptcy court for permission, which doesn’t come easy.

Are lawsuit settlements included in bankruptcy?

When you file for bankruptcy, you are required list all of your legal claims and causes of action (such as personal injury or breach of contract claims) as assets on your bankruptcy schedules. If you receive a settlement from a lawsuit after filing for bankruptcy, your settlement proceeds may be considered the property of the bankruptcy estate even if your bankruptcy case has already been closed.
Determining whether a settlement from a personal injury claim will be considered the property of the bankruptcy estate depends on the date of your injury. If your claim arose prior to your bankruptcy, any settlement you receive after you file your case will usually be the property of the bankruptcy estate. Whether you can keep your settlement proceeds depends on the type of claim and the exemption laws in your state. The good news is, most states have established exemptions specifically designed to protect a certain amount of personal injury recovery.

Maybe you can avoid bankruptcy

While in most cases debt settlement is something that should be avoided, however avoiding bankruptcy may be more important. If you have to choose between settling a few debts or filing bankruptcy, you should probably settle the debts, but you have to do it right.  Generally speaking, you should avoid using a debt settlement company, because it will likely cause you more money.
If you have questions regarding personal injury claims and bankruptcy, or any other personal injury concerns in Arkansas or Missouri, please contact the Cottrell Law Office for a consultation, either online or by calling us as (888) 433-4861.

Author Photo

Wesley Cottrell

Wes Cottrell earned his B.A. from Pittsburg State University in 1981 and his J.D. from the Washburn University School of Law in Topeka, Kansas in 1985. He was admitted to practice law in Kansas in 1986, in Missouri in 1987, in Arkansas in 1989, and Oklahoma in 1993. He is licensed to practice law in the United States District Court for the District of Kansas, eastern Arkansas, western Arkansas, and western Missouri. He was Deputy Prosecuting Attorney in Crawford County, Kansas from 1987-1989.

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