It is not uncommon for a personal injury client who has been seriously injured in an accident to face financial issues in addition to health issues. With piling up medical bills and lost wages, filing bankruptcy might seem like the right solution. However, In Chapter 7, the debtor must give up all of his non-exempt property to be able to wipe out most of his debts. Potential personal injury causes of action that arose prior to bankruptcy filing are considered property of the debtor and unless the settlement value of the debtor’s personal injury case falls within the ‘wildcard’ ($4,000) and personal property ($1,000) exemptions, they must be surrendered for distribution to creditors just like any other non-exempt property.
If the settlement value of a potential personal injury case falls within the available exemptions, there are steps the debtor can take to preserve the settlement proceeds in bankruptcy. First of all, the debtor must disclose the personal injury claim in his bankruptcy schedules. Failure to disclose a claim on the schedules is not only a criminal offense known as bankruptcy fraud, it may also lead to loss of any recovery to which a debtor might be entitled to in the case, may result in a denial of any exemptions the debtor may be entitled to claim, or may result in a denial of a discharge in bankruptcy, even if the failure to disclose is unintentional.
If the settlement value of a potential personal injury case substantially exceeds the allowed exemptions, the bankruptcy trustee will likely take over the case and will pursue the litigation and negotiate settlements. Any settlement proceeds will then be distributed to creditors.
At Anna Handy Law Firm, P.A., we are knowledgeable with both bankruptcy and personal injury law and can help you navigate your personal injury case through bankruptcy to protect as much of the proceeds of settlement or judgment as possible. If you would like to have your case evaluated by an experienced personal injury and bankruptcy attorney, call our office now for a free non-obligation consultation. You owe us nothing unless we win your case. (386) 248-3000.