Bankruptcy and Your Personal Injury Claim: Hold Those Horses

If you’ve been injured and think you have a personal injury claim, it’s best not to file for bankruptcy without first speaking to a personal injury lawyer in Marysville. Unfortunately, you could be risking a significant portion of that claim if it becomes part of a bankruptcy, and it will if you file with the bankruptcy court.

Personal Injury Claims as Assets

In bankruptcy, your personal injury claim is treated like other assets such as your bank account, house or car. This means your claim will be part of your bankruptcy schedules, even if you haven’t yet filed the lawsuit or made the claim for your injury formally. As long as the injury date was before you filed for bankruptcy, any claim stemming from that injury becomes an asset and is subject to what happens in bankruptcy court.

This means, for example, that if you are hurt in a car accident in June and file your bankruptcy in November, you still must include a potential personal injury claim from that car accident as an asset in the bankruptcy. Any compensation you receive on your claim becomes subject to the bankruptcy court. The issue isn’t whether you’ve filed a claim for those injuries but whether you may end up with a claim for them some time in the future. You must list that claim even if you haven’t decided on filing it yet, as failing to list it as an asset but then making the claim later can have serious consequences on your bankruptcy case in negative ways.

Bankruptcy is Common After an Accident

Many people who are injured and then lose work and end up with pile of medical bills from it file bankruptcy because of all the expenses and lost wages. It can be difficult to catch up on bills when you’ve missed time at work and have to pay for medical expenses. However, in doing so, a significant part of their injury claims end up in the hands of their creditors. Since filing bankruptcy also grants an automatic stay against litigation, you may not be able to resolve your personal injury claim while your bankruptcy is ongoing.

You may be better off actively working on your personal injury claim before filing for bankruptcy. The claim may resolve any outstanding medical bills from the injury you’re concerned about, and you also might recover enough funds to catch up on other bills, rendering bankruptcy unnecessary. Your personal injury attorney will advise you on what he or she believes you’re likely to recover in a claim, so you’ll have an idea of what to expect.

Even if you feel you have no choice but to file bankruptcy right away or you filed before you resolved a possible personal injury claim, you should still speak to a personal injury lawyer in Marysville about it. A personal injury attorney can, for example, help arrange for the lift of an automatic stay from the bankruptcy court so you can go after your claim and resolve it. He or she can also work with your bankruptcy attorney to use the state and federal exemptions found in bankruptcy laws to help you keep all or part of the funds from your claim.

Every situation is unique, so your bankruptcy attorney, with help from your personal injury attorney, will be able to determine what the best course of action will be to maximize the exemption amount put toward your personal injury claim. Keep in mind, however, that the fees your personal injury attorney charges are not counted in the exemption application. So, for example, if your attorney charges you $10,000 as a contingency fee on your $30,000 claim, only the $20,000 you receive will be applied to the exemption.

In short, if you were injured, talk to a personal injury lawyer in Marysville before you decide to file for bankruptcy, even if you’re worried about bills. An attorney will assess your claim to see how viable it is and advise you on whether you would be better off pursuing that claim before you file for bankruptcy. It’s better to know whether you should file bankruptcy before you actually do it.