What You Need To Know About Bankruptcy 

Juliet D'cruz

Updated on:

What You Need To Know About Bankruptcy

If someone is at fault for an accident, they ought to do everything possible to ensure you are compensated for your damages and other losses. Since most at-fault parties do not do this alone, injured people can file a personal injury case in civil court. And if you win your lawsuit, you will almost certainly receive monetary compensation through a settlement or court ruling. 

However, your right to collect this money would be challenged if the defendant declares bankruptcy. This could be a deliberate plan to avoid paying you or the consequence of genuine financial trouble. In any case, bankruptcy proceedings not only put an end to most personal injury claims but can also wipe out a judgment in favor of the plaintiff. If you have been involved in a personal injury case, learn more here about the steps you should take. 

Basics of Bankruptcy 

Bankruptcy proceedings occur in federal bankruptcy court, and these cases have their own set of complex rules and laws, including the rights of debtors and creditors. One of the most crucial bankruptcy concepts to understand in the context of personal injury claims is the automatic stay. This special court order takes effect automatically once a debtor files for bankruptcy. Civil cases, including personal injury cases, can be paused and sometimes completely stopped under this provision. 

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Exceptions to the discharge of personal injury debts 

Two kinds of personal injury claims are not discharged if the defendant declares bankruptcy. 

One is when your injury claim involves a fatality or injury caused by the debtor’s drunk driving. The bankruptcy court cannot discharge these kinds of debts in Chapter 7, 11, or 13 bankruptcy proceedings. 

The other is when the purposeful or malicious act of the defendant causes your injury, including an intentional tort. You may generally be able to prevent this type of debt from being discharged during a Chapter 7, 11, or 13 bankruptcy proceeding, but you must file an objection. If you do not do so, or if the bankruptcy court rules against you, the defendant may be able to discharge these debts. 

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If the bankruptcy was filed before the lawsuit 

Suppose the defendant filed for bankruptcy before you were injured. In that case, you might be allowed to pursue your personal injury claim, but this may only be the best decision if there is sufficient insurance coverage to pay any settlement or judgment in your favor. 

Talk to a lawyer today. 

Have you been involved in a personal injury claim? If so, you may have many questions about how to proceed and what mistakes to avoid. An experienced personal injury attorney can help you, so schedule an appointment today.