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Bankruptcy and Your Personal Injury Case

You’ve been injured in car accident. You pursue a personal injury claim, hire an attorney, collect your evidence, and—in the best circumstances—you win your case. But, you’ve also gone through bankruptcy. In fact, you may be dealing with bankruptcy now. What does this mean for your personal injury case? If your case succeeds, do you get to keep your compensation? These are very important questions to consider if you’re going through bankruptcy, and we’re here to answer them.

A personal injury claim is designed to help you get compensation for lost wages. If you’re going through bankruptcy, it doesn’t matter so much where the compensation comes from—whether it’s related to a car accident, a work-related accident, or a slip-and-fall accident. Whether your claims are protected is dependent on what chapter of bankruptcy you’ve filed, and where you are in the process.

Chapter 7 Bankruptcy

When you file for Chapter 7 bankruptcy, you’re able to discharge all your debts, but you also sell off (or liquidate) your entire estate. When it comes to your personal injury compensation and Chapter 7 bankruptcy, timing is everything.

If you file for Chapter 7 bankruptcy before your accident takes place, and therefore before you collect any damages, the compensation is yours to keep.

If, however, your accident takes place before you file for bankruptcy and you collect compensation, that money becomes part of the bankruptcy estate. The bankruptcy trustee will own the compensation.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy works a little differently. Rather than a complete discharge of debt, Chapter 13 is a reorganization of that debt. People with a steady income are allowed to organize and repay some or all of their debts within three to five years.

The good news is that, whether you file for Chapter 13 bankruptcy before or after your accident, any personal injury compensation you get is yours to keep. However, the bankruptcy trustee must approve of the personal injury settlement.

Keeping your compensation

No matter which chapter you’ve filed or where you are in the bankruptcy process, it’s best to err on the side of caution and always disclose any personal injury compensation in your bankruptcy schedules. If you don’t disclose your compensation, even if the failure to disclose is purely accidental, you could lose all of the funds you’ve recovered. There have been cases where a court has gone back years and ordered previously undisclosed personal injury compensation to be handed over due to a bankruptcy filing.

While there is a chance you won’t be able to keep your compensation if you’re going through bankruptcy, trying to hide it almost guarantees that you won’t be able to keep it once it comes to light.

Accidents aren’t something you can plan, so you can’t put off an accident until it fits into your life better. Accidents can happen to anyone, at any time. If you’re injured in an accident, you shouldn’t let circumstances like bankruptcy keep you from seeking any damages you’re owed.

Be honest with your bankruptcy attorney if you’re in an accident, and disclose any compensation you receive from your personal injury case. You may not always be able to keep that compensation, but being honest with your attorneys will help them fight more effectively on your behalf. You have a better chance of keeping your compensation with a competent attorney on your side, so be honest and up front, no matter what the situation.

Attorney David Goldman has a strong belief that everyone should be treated fairly and those with the means should do what they can to bring justice in all areas of our society. That belief has led him to help Florida's injured from being taken advantage of by corporations and insurance companies. Since 1989 David Goldman has been fighting for the rights of Floridians both as an attorney and by personally supporting our community.

Bankruptcy and Your Personal Injury Case

Goldman Babboni Fernandez
Murphy & Walsh

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