What Affect does Bankruptcy have on my Injury Claim

This entry is the third in a series of blogs dealing with the overall effect of an injury claim on a person’s ability to work, and lost wages.  Wouldn’t it be nice to be Peyton Manning or Dwight Freeny?  Of the many things they have to be thankful for is that they have earned enough money that if they get hurt (and that is likely in the NFL) they will not have to worry too much about lost wages.  Unfortunately the rest of us are not so lucky.  Say you are in a car wreck with a drunk driver, or you are hit by a semi tractor trailer in a highway accident, or you are hurt in a construction  accident, like a fall or electrocution, and say also you are severely injured, such as being paralyzed, having an amputation, burns, spinal cord injury, having a brain injury, a back injury, blindness, and you do not have a lot of savings.  You might have to consider filing bankruptcy before your claim is resolved.  What does that do to your claim?

Once you file bankruptcy, your creditors can no longer harass you.  However, in filing bankruptcy you must list all of your assets.  One of your assets is the injury claim.  This is an asset because it has potential value.  What I mean is that if you are properly compensated, you will be paid money to make up for your injuries.  The claim, as an asset, become part of your bankruptcy.  The trustee of your bankruptcy case will look at your claim and try to determine if it is a good claim, or a claim that is not likely to merit compensation.  If the trustee thinks the chances of recovering compensation are slim then the Trustee has the ability to abandon the injury claim.  What the trustee is saying when he /she abandons a claim is that it is not worth the time to pursue, and therefore he/she abandons it. You are then free to pursue the claim as if the bankruptcy did not occur.

If the Trustee thinks the claim has merit, he/she will hire a lawyer to give them an opinion about the value of the claim and to pursue the matter.  Usually the trustee will hire the same accident attorney or injury attorney as you hired.  The trustee will be the named plaintiff (in your place) and will have all the decision making powers.  The trustee can order the case settled or order it to go to trial.  No matter how the case is resolved, all the money will go into the bankruptcy to be distributed according to the plan of the bankruptcy.  The overall impact of the bankruptcy is that you give up control of the claim and of the settlement.  If there is money left over after the bankruptcy claims have been paid, then you will be entitled to that money.

It may not seem fair, as you were injured and the injury caused you file bankruptcy, but being free of the harassment of creditors has great value.  At Young and Young, we have handled many injury claims for people who must also file bankruptcy.  Give us a call, we can help.

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