Filing a Personal Injury Case After Bankruptcy
Filing for bankruptcy can be terrifying. Placing your finances at risk and allowing creditors to chip away at your assets is not a desirable place to be, but occasionally it will be necessary to discharge your family’s excessive debts. If you do find yourself in a situation in which you need to file for bankruptcy, you should be aware of how it could affect your personal injury claim or any settlement or judgment you have received in the past after winning your injury case.
The Legal Effect of Bankruptcy on Personal Injury Cases and Settlements
Bankruptcy filings can affect your personal injury compensation in several ways. In general, all of your personal property must be collected and accounted for by your bankruptcy trustee. This accounting will include any compensation that you have earned from personal injury claims. At the very least, your creditors must be made aware of the existence of your compensation.
In a Chapter 7 bankruptcy liquidation proceeding, all of your non-exempt assets will be sold and the funds will be distributed to your creditors. In a Chapter 13 bankruptcy, money that you won in a personal injury lawsuit will become a part of your Chapter 13 bankruptcy plan. As a result, the trustee will collect any future personal injury compensation and hold it for you under trust until control of your assets is returned to you at the conclusion of the bankruptcy case.
Weighing the Benefits of Disclosure to the Trustee and Your Attorneys
Do not try to hide your personal injury winnings. By law, you must disclose your assets to your bankruptcy trustee. Leaving anything out can create massive criminal and civil problems for you if your deception is discovered (and it almost always is). Always tell your trustee the nature of what you have and how you earned it.
Similarly, you should make sure that your attorneys are on the same page. It is common for your personal injury attorney and your bankruptcy attorney to be different people. If either is unaware of what the other has done to help protect you, it could prevent you from achieving the best result in either instance. Make sure that your attorneys confer with each other either by picking up the phone or having an in-person meeting to discuss what measures will be best to protect you.
Protecting Your Personal Injury Compensation From Bankruptcy
In many cases, it is possible to protect your personal injury compensation from creditors, but you will need to plan ahead. If you win a personal injury verdict or settlement, you should have a conversation with your attorney about your financial status, particularly if your debt may force you to declare bankruptcy sometime down the road. Your personal injury attorney can use various financial mechanisms such as untouchable trusts or delayed payments to ensure that you get the maximum benefit from your personal injury lawsuit at the lowest cost to you.
If you did not discuss these financial matters with your personal injury attorney at the time you received compensation in court or a settlement, now is the time to do so. If you are contemplating a bankruptcy filing and have personal injury compensation that you want to try and protect, contact an attorney immediately to see if anything can be done to help safeguard you at your most vulnerable time.
Contact an Attorney Today
To get sound legal advice on the best path forward, contact the experienced and skilled attorneys with Michael P. Fleming and Associates today 713-221-6800. Our legal team is here to help you and your family.