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Bankruptcy and Personal Injury Cases


Bankruptcy and personal injury don’t often intersect, but when they do, there can be big problems. If you are filing a personal injury case, you should understand how a bankruptcy can affect you–whether you are the one filing or the person or business you are suing is the one filing. 

When The Person or Business You are Suing Files

It used to be rare to sue a business for injuries and have the business file for Chapter 11 bankruptcy. But with the COVID crisis, more and more businesses are filing for bankruptcy, which means that if you are suing a business, you should be aware of what could happen.

First, your claim will take a lot of time to resolve–potentially, a lot of time. That’s because when the business files for bankruptcy, there will be a stay on any creditors collecting against the company–and you, as someone suing for an injury, are considered a creditor.

There is a chance that at some point your lawsuit will be able to proceed–but not always. In many cases, a Chapter 11 court will prohibit certain people with claims from bringing them against a debtor. In other cases, you may have to hire a bankruptcy lawyer to represent you in the bankruptcy and protect your right to bring your lawsuit.

When You File for Bankruptcy

First, it’s important to remember that you must list not only active, filed personal injury cases as an asset on your bankruptcy paperwork, but even possible lawsuits. For example, if you were injured in a car accident, and are getting treatment, but you haven’t actually filed a lawsuit against the responsible party yet, you still need to list that you have an ability to file a lawsuit.

When you list your lawsuit, it will be considered an asset just like physical property that you own. The bankruptcy trustee will look at information in your case and determine whether or not it’s worth “taking” from you.

The trustee will look at your chances for winning, and the possible settlement or jury verdict that may be rendered in your favor. Of course, if you have a smaller case, and the expected value of the case fits within an exemption, the trustee may not be able to take your lawsuit at all.

But the trustee can take the lawsuit if it does not fit in an exemption, which is why it may be a good idea to either wrap up (settle, if possible) your personal injury case before you file for bankruptcy, or be prepared to surrender the case (that is, the proceeds of any settlement or verdict) to the trustee. Obviously, if you stand to win or be awarded a significant amount, you may be better off waiting to file for bankruptcy.

Call the West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller at 561-264-6850 to discuss the best time to file your bankruptcy case, and how to best handle your assets.



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