Can Bankruptcy affect Personal Injury Comp

Posted on Saturday, July 4th, 2020 at 12:52 pm    

When a person seeks a personal injury claim against a person or company, they are able to get compensation. Such compensation is a way of becoming financially ‘whole’. However, when that person is facing bankruptcy, they could lose these awards. However, this depends on the type of chapter filed and what is exempt. This article and a subsequent one will discuss whether personal injury awards are exempt from bankruptcy proceedings.

Generally, a personal injury claim award is exempt when filing for Chapter 7 and Chapter 13 bankruptcy. However, these awards may have a limit on how much is exempt. If the person going through bankruptcy does not disclose the claim, they may lose it to debt collectors. Or if they are unsure how to protect the monetary assistance, they may still lose it. There are steps the person needs to take to protect these funds when proceeding into bankruptcy Chapter 7 or 13.

Bankruptcy and Personal Injury Compensation

When a person suffers an injury at the hands of another, they may file a personal injury claim against them. When all requirements are met, the person succeeds and receives compensation for the damages and losses they have suffered. Such losses may include:

  • medical bills,
  • property damage,
  • physical injuries,
  • emotional or psychological trauma or
  • pain and suffering

Once compensation is received the injured person may pay off debts and protect their household.

As with other assets a person has during bankruptcy procedures, it is necessary to disclose personal injury claim. Such a claim is no different from other assets like a house, car or furniture.  When pursuing bankruptcy through either Chapter 7 or 13, it is crucial to disclose everything relevant to the process. And this includes a personal injury claim. Failure to do so could lead to a loss of any or all awards a person is entitled to. Even if the money is necessary for expenses it will go directly to creditors when received.

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