Debt, Bankruptcy, and Personal Injury Cases

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Debt, Bankruptcy, and Personal Injury Cases

After a major accident, medical bills can really pile up. Contemplating bankruptcy is smart, but you want to make sure you choose the right case at the right time.
 
If you don’t have a personal injury case in the works, filing is a great idea. Medical debt can quickly skyrocket into an amount so large you’ll never be able to pay it in your natural lifetime. And while medical creditors can be easier to work with than other creditors, sooner or later that crushing debt is going to keep you from other things you need, like a mortgage or a car loan.
 
 
But if you do have a personal injury case pending, or a workman’s comp case, or any other civil lawsuit where you might receive a lump sum of money, it may be advantageous to wait.
 
While it can be stressful to wait for your settlement or award, it may be even more stressful to lose most of that money. If you receive the settlement while you’re in the middle of a bankruptcy most of the money will go to the estate. There are personal injury exemptions, but you can only claim up to $23,675 of compensation for bodily injury. There are certain laws which allow us to push the exemption up to $47,350 if both spouses are filing.
 
This is a situation that calls for some strategy. You’d want to look at how much you are anticipating versus the level of debt you have. In a case where the award that you’re anticipating will pay your bills and leave a huge sum of money besides, waiting is smart. You could lose most of the money to a trustee. Bad news, if some of it was meant to cover your living expenses because you can no longer work.
 
 
If you’re anticipating a very small award that would fall beneath the protection of the exemptions it may be okay to proceed. Indeed, in that case you may keep more of your money, as the trustee could only distribute the non-exempt amounts before discharging all the debts. The payment the providers receive could be much smaller than what you’d have to pay if you were trying to do it all on your own.
 
You must disclose the claim if you make it after you file, or if you receive a payment. You should also disclose the pending case. And keep in mind the case has to be disclosed if you got injured before you filed for bankruptcy, even if the lawsuit doesn’t start until after your discharge. If an injury occurs after your discharge you don’t have to report the case.
 
 
Trustees do check court records to make sure the bankruptcy estate isn’t being defrauded by a failure to disclose a case. You should make sure you disclose even if you have no idea how much money you could be getting. Usually your attorney will have a ballpark idea.
 
The amount of money you’re going to win isn’t the only consideration in whether you file for bankruptcy while the claim is outstanding. Trustees don’t always allow borrowers to keep their own attorney. Sometimes they pursue the claim themselves. Sometimes they settle for far less than you’d have gotten, is all they care about is getting the debts paid. Meanwhile, had you waited, you could have gotten everything you needed to pay back the debt, and then some.
 
 
Timing can be everything in bankruptcy cases. Identifying the right time is part of our job as bankruptcy attorneys.
 
Don’t try to figure it out on your own. Call to schedule a free consultation instead.
 
 
 
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