Personal Injury and Bankruptcy

February 6, 2023

By Thomas McCutcheon

Injuries have more consequences than pain. Injuries are more than a distraction; certainly, people who are injured and in pain cannot function as they usually do. Often injuries create financial hardship. Most people don’t have the financial resources to go without a paycheck for very long, but when they’re injured, they have no choice. Occasionally, after an accident, people file bankruptcy for protection from their creditors.

The Bankruptcy Court technically owns everything that a bankrupt person has above their state exemptions. Each state allows an amount of money per person for a home, personal effects, tools of the trade, clothing and automobiles. Money or property over the amount allowed by your state is available to be distributed to creditors. The vast majority of people who file bankruptcy never run into a repayment situation because people who file generally don’t have too many assets.

A personal injury case is an asset. It may not be one you want, but when the court system trades pain and suffering and lost wages into a monetary payment by the wrongdoer that payment is an asset. If a person files bankruptcy and has a personal injury case, they must notify the Bankruptcy Court.  

A lawyer has to be appointed and approved as “special counsel” by the Bankruptcy Court for representation in the personal injury case. If a person does not disclose that they have a personal injury case to the Bankruptcy Court their claim can be held to be invalid and dismissed in State Court.

It’s important to know and remember that if a person has an injury claim and files bankruptcy that they tell their bankruptcy lawyer and their personal injury lawyer about their personal injury case.

Buckle up, drive safely, and as always, your referrals are appreciated!


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