Unfortunately, it often happens that an individual who was involved in a severe car crash, slip and fall or any other type of accident, s/he loses the ability to work temporarily or permanently. With all the medical expenses, this can lead to financial issues which force the person to file for bankruptcy. This could happen both to a responsible party or a plaintiff waiting for a reasonable personal injury settlement.
If you have a pending personal injury claim and are thinking about filing for bankruptcy, it’s essential that you consult a bankruptcy attorney and a personal injury attorney to work out the best plan for you. What is more, this claim should be disclosed in your bankruptcy filing, otherwise, it will be a criminal offense.
Since the Bankruptcy Code offers many solutions for people in a difficult financial situation, you are able to choose the Chapter. Below a Bankruptcy Lawyer, James M “Jack” Setters explains which one is better for you.
In Chapter 7, the bankruptcy trustee has full authority to pursue litigation, including personal injury lawsuits, on behalf of the plaintiff. Any amount of settlement must be approved by the bankruptcy court. The injured individual cannot challenge any settlement, unless she or he can convince the court that the recovery ought to be bigger in order to pay every one of the creditors in full, with the additional payments to the injured individual.
In case you get a reasonable personal injury award, you will not only pay all the creditors but also deal with the debts that are usually discharged. Unless there is an excess of money, the victim has no right to take part in the negotiation process or to object the amount of the settlement. Additionally, the trustee normally does not have a large motivation to push for a maximum recovery as this is not your personal injury lawyer.
What is worse, when Chapter 7 case is filed, only the huge debts are dischargeable. If the plaintiff incurs additional medical expenses later, those are not dischargeable, and the injured individual is liable. So, unless you want to give up the claim entirely, you should be careful with Chapter 7. On the other hand, if your personal injury attorney expects that the settlement will cover only your medical bills, Chapter 7 is a good option. This is because there is very little risk that you will be required to turn over any of your settlement into your bankruptcy estate.
Usually, a Chapter 13 bankruptcy is a better option for an individual who has a personal injury claim, but is either in collection or is being sued by lenders. The individual will be protected by the automated stay that is a feature of bankruptcy. The debtor is allowed to select their very own counsel who will be accepted by the court to represent the interests of both the borrower and also the bankruptcy estate.
To sum up, both Chapters have their own advantages for different personal injury claims and situations, whether you should pay or obtain the settlement. That’s why, don’t hesitate to contact a bankruptcy attorney to prevent any serious consequences because of the wrong choice. With 20 years of experience preparing and filing thousands of Chapter 7 and Chapter 13 cases, we are sure we can help you.