How a Bankruptcy Filing Affects a Personal Injury Claim

Posted in Accident Information on January 17, 2021

Every personal injury claim is unique. Some encounter complications, such as one party filing for bankruptcy. A bankruptcy filing can affect a personal injury claim in many ways – including the possibility of taking away an injured person’s ability to seek financial compensation from a defendant. If you believe your personal injury claim will involve a bankruptcy filing, learn more about what this may entail with help from an attorney.

If the Defendant Files for Bankruptcy

The defendant is the party allegedly at fault for causing the victim’s injury and losses. A defendant will be financially responsible for an accident if he or she caused the accident by failing to uphold the accepted standards of care. But what happens when the defendant does not have enough money or assets to pay for a victim’s losses? The answer depends, but it may involve a bankruptcy proceeding.

Some defendants file for bankruptcy if they cannot afford to pay a settlement or jury verdict awarded to a plaintiff. Upon filing, the defendant will be granted an automatic stay. An automatic stay is an injunction that effectively prevents debt collectors from seizing the defendant’s property or taking legal action to do so, such as filing liens against the defendant. The point of an automatic stay is to protect the debtor’s assets against all creditor actions.

In this scenario, a creditor cannot proceed with any litigation, trial or enforcement of judgments won against the defendant. However, an automatic stay is not without its limits. As a plaintiff, you may be able to continue with your claim despite an automatic stay if your situation meets the requirements of the Bankruptcy Code. You will need to seek relief from an automatic stay from the Bankruptcy Court by filing a motion.

In your motion, you will explain the legal basis on which you are seeking relief from an automatic stay, along with related documentation to support your claim. You will also need to pay a filing fee. If the Bankruptcy Court rules in your favor, the defendant may have to pay for your losses. If the court discharges all debts the defendant owes, you may no longer be able to pursue compensation. You may have to end your claim there, or else have your attorney search for other defendants to hold responsible for your losses.

If the Plaintiff Files for Bankruptcy

Another possibility is the plaintiff in a personal injury claim filing for bankruptcy. If you file for bankruptcy during a personal injury lawsuit in Nebraska, this can impact your ability to recover compensation from a defendant. Once you file for bankruptcy, the defendant can file a motion for summary judgment. This means the defendant will no longer be the real party in interest in the lawsuit. Instead, your case will be handed over to the Bankruptcy Court and your trustee – a person appointed by the federal court to take possession of your bankruptcy estate.

If you file for bankruptcy in the middle of a personal injury claim, your trustee will take control of how to proceed with the lawsuit. You will lose your autonomy in deciding whether to settle with an insurance company or take your case to trial. These will be decisions made by your trustee instead, with the approval of the bankruptcy court. This is why it is extremely important to consult with an attorney before you file for bankruptcy prior to the resolution of your personal injury claim.

Get Help With Your Personal Injury Claim in Omaha

How bankruptcy will affect your personal injury claim depends on many factors, including the type of bankruptcy filed and who files. The most common types are Chapter 7, Chapter 13 and Chapter 11 Bankruptcy. A personal injury lawyer in Omaha can help you navigate a complicated claim where you or the defendant files for bankruptcy. Before you go any further with your case or a bankruptcy filing, contact an attorney for legal advice.