Can Bankruptcy Affect Your Personal Injury Case?

Though there are many reasons as to why an individual would file for bankruptcy, it is common that the reason has to do with wanting a fresh start. This was in fact the purpose of the bankruptcy code. The Supreme Court has even stated that it allows the unfortunate debtor “a new opportunity in life.” This is a saving grace for the 1,181,016 individuals and 40,075 businesses in the United States who filed for bankruptcy in 2012 alone.

Unfortunately, It is not uncommon for individuals who have suffered from a personal injury to find themselves filing for bankruptcy. This often occurs due to an injury that leaves them with lost wages from an inability to work, along with exponentially high medical bills – with or without insurance. Creditors begin to descend upon the debtors and often bankruptcy is their only way out.

Filing for Bankruptcy

While bankruptcy can be extremely helpful, it is important to keep in mind that it can in fact affect your personal injury case. If your personal injury attorney does not understand how it can do so, or does not know that you have filed, it could prevent you from recovering all together and could leave the individual responsible for your injuries completely off the hook.

The Bankruptcy Estate

When an attorney has filed a bankruptcy petition on your behalf, it creates an estate. This estate includes all of your legal and equitable interests as of the date of the filing. This not only includes claims that you have already brought, but also those that you have a right to bring but have not yet done so. If an individual files for Chapter 13 bankruptcy, even property acquired after the case began but before it was completed, could become a part of the bankruptcy estate. This even includes any injuries that you suffer after the filing of the petition. This holds true regardless of Virginia law, which makes any recovery from a personal injury completely free from creditors.

The Requirement of “Standing”

In order to have the standing to bring your personal injury claim in your own name, you must first list any and all property in the schedules provided by your bankruptcy attorney – this includes any personal injuries, which you may list as exempt but must still place an accurate value on. The personal injury attorney will ensure that your values are correct and then the bankruptcy trustee will either abandon the claim or rule it as exempt.

This was shown to hold true in the 2011 Virginia Supreme Court case of Kocher v. Cambell. In Kocher, a debtor who failed to list his personal injury claim was ruled to have lack of standing when he eventually filed his personal injury claim. The Court instead held that the claim was property of the estate since it had not been properly exempt at the time of the bankruptcy filing.

What Should You Do?

If you or a loved one has filed for bankruptcy before you were injured or as a result of your injury, it is important to find a knowledgeable and experienced bankruptcy attorney and personal injury attorney to help you to understand your options.

Posted in: Bankruptcy