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How a Bankruptcy Filing Affects Personal Injury Claims

Legally Reviewed and Edited by: Terry Cochran

In today’s economy, bankruptcy filings could soon be on the rise. Bankruptcy filings can have profound effects on your life and also impact any personal injury claims.

With any bankruptcy filing, you are required to disclose personal injury claims, whether you have filed a claim or not yet. Throughout the bankruptcy process, you must continually provide updates until the bankruptcy case is dismissed.

Accident claims and lawsuits are recognized as assets, and as such, are included in a bankruptcy. However, the effect will largely depend on whether you file for Chapter 7 or Chapter 13 Bankruptcy.

Chapter 7 Bankruptcy Filing

personal injury claims

Overall, Chapter 7 bankruptcy filings are the most common per year in Michigan.

Filing for Chapter 7 Bankruptcy encompasses your entire estate, which is then liquidated. Along with this, the majority of your debts are discharged. A trustee will be appointed as the administrator of your bankruptcy estate.

If the date of your accident, for which you plan to file a personal injury claim, is prior to your filing for bankruptcy, the trustee is in charge of your personal injury case.

On the other hand, if the accident occurs after you have filed for Chapter 7 Bankruptcy, the personal injury case is yours alone. The bankruptcy trustee will not be involved, and your personal injury attorney can find the best solution based on your case.

Chapter 13 Bankruptcy Filing

In filing for a Chapter 13 Bankruptcy, you are asking for a reorganization. This type of filing is usually for those with a steady income needing to restructure their finances. Again, a trustee is appointed as the administrator of the estate.

A debt payment plan is created, with debts being paid out of future disposable income, usually within a three to five-year timeframe. This does not affect property owned by the filer.

The debt payment plan may include all debts or just some of them. Once the payment plan is completed, most of the outstanding debt is discharged.

For a Chapter 13 Bankruptcy filing, it doesn’t matter whether the accident occurred before or after its filing. The personal injury case is yours, and your accident attorney’s to oversee. The only caveat is that the court and the trustee will need to approve any settlement you receive.

To File Or Not To File

If possible, avoid filing for bankruptcy if you’ve suffered a personal injury. Otherwise, it becomes part of the bankruptcy estate, and you lose full decision-making authority when it comes to the value and settlement of your case. With the trustee’s focus on paying off creditors first and foremost, the settlement amount may be less than you deserve.

Talk with Our Experienced Personal Injury Attorneys Today

If you’ve suffered a personal injury and are conflicted about whether to file for bankruptcy, contact our personal injury attorneys at Cochran, Kroll & Associates, P.C. for confident legal advice. Schedule a free consultation by calling 866-MICH-LAW.

Disclaimer : The information provided is general and not for legal advice. The blogs are not intended to provide legal counsel and no attorney-client relationship is created nor intended.

Emily is a writer and legal professional with experience as a law firm paralegal and non-profit legal administrator. Prior to her legal career, Emily earned her Bachelor's Degree in International Affairs and worked with a government consulting group out of Washington, D.C. Today she splits her time between the Florida coast and the North Carolina mountains.



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