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Filing For Bankruptcy During Your Personal Injury Claim Has Serious Repercussions For The Plaintiff

If you are in the process of a personal injury claim and are considering filing for bankruptcy protection it is 100% essential that you get legal advice from both your personal injury attorney and your bankruptcy lawyer.

We cannot overstate the importance as file for bankruptcy will have a major impact on your personal injury claim.

There are laws governing this situation and not complying with the regulations will may negative consequences on the outcome of your personal injury lawsuit.

First you must disclose your personal injury claim to your bankruptcy attorney. Under the law, your personal injury settlement will become part of your personal assets in your bankruptcy proceedings.

That means once you have filed for bankruptcy any funds awarded from your personal injury settlement become an asset of the bankruptcy estate to be available to pay bankruptcy trustees.

Another way of looking at it is your settlement will no longer belong to you, but will be owned by the bankruptcy trustees. However should the amount awarded to you in your personal injury case be more than what is required to satisfy the creditors in your bankruptcy case, the remaining amount would be yours.

Additionally there are implications for your personal injury attorney. In order for your personal injury attorney to continue with your personal injury lawsuit, he or she must be appointed as “Special Counsel”.

This would not change the goal or tactics of your personal injury law firm, but it does mean that even though you are the plaintiff, you would no longer have the authority to approve the settlement amount should your claim prove successful. That authority is now with the Bankruptcy Court and they have their own set of motivations, which generally lean towards getting what they can fast, rather than continuing to push for a larger settlement amount.

If your personal injury settlement is successful and a settlement amount is awarded, the funds will be distributed to the creditors at the bankruptcy court’s discretion. Only when the debts to the creditors in the bankruptcy filing are satisfied will you receive any money from your personal injury settlement.

Filing For Bankruptcy During Your Personal Injury Claim Has Serious Repercussions For The Plaintiff

Goldman Babboni Fernandez
Murphy & Walsh

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