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How Does Bankruptcy Affect My Personal Injury Case?

Bankruptcy and personal injury cases can go hand in hand. When an individual is involved in a serious car accident, slip and fall accident, or another type of accident, he or she is often unable to work for a time or permanently. This can lead to financial devastation, which can lead to bankruptcy. This can happen even though the injured party is expected to receive significant compensation in a personal injury claim.

If you are contemplating filing for bankruptcy,

and you have a pending personal injury claim, it’s critical that you speak with a bankruptcy attorney. In addition, you must disclose the personal injury claim in your bankruptcy filing – a failure to do so is a criminal offense.

In most cases,

the injured individual should not file a Chapter 7 bankruptcy unless he or she is willing to entirely give up the claim entirely. In Chapter 7 bankruptcy cases, upon the filing of the case, the bankruptcy trustee becomes the representative of the creditors. The bankruptcy trustee then has complete authority to pursue litigation, including personal injury litigation, on behalf of the injured individual. Any settlement must be agreed to by the bankruptcy judge. The injured person cannot object to any settlement, unless he or she can convince the judge that the recovery should be larger in order to pay all of the creditors in full, with the extra payable to the injured individual.

If there is sufficient money from the personal injury settlement, creditors must be paid in full, even including unusual debts that normally would not be required to be paid. Unless there is a surplus of money, the injured party has no standing to participate in the settlement process or to object to the amount of the settlement. Also, the trustee normally does not have a big incentive to push for a maximum recovery.

Also, what can make a Chapter 7 bankruptcy an even worse decision for an injured individual who is expecting a settlement is the fact that when the Chapter 7 case is filed, only the outstanding debts at that time are dischargeable. If the injured party incurs additional medical expenses later, those are not dischargeable, and the injured individual is liable.


a Chapter 13 bankruptcy is a much better choice for a person who has a personal injury claim, but is either in collection or is being sued by creditors. The individual will be protected by the automatic stay that is a feature of bankruptcy. The debtor is allowed to choose their own counsel, and that counsel will be approved by the court to represent the interests of both the debtor and the bankruptcy estate.

Have you experienced a serious accident that you expect will result in a settlement, while at the same time being hounded by creditors? Don’t act quickly and file for bankruptcy without consulting with an attorney.

If you’re in the Atlanta area,

call Atlanta bankruptcy attorneys at Holston & Huntley. We handle both personal injury cases and bankruptcy cases, and can help advise you on your options. We serve Metro Atlanta Georgia as well as Birmingham Alabama including surrounding areas.

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