Bankruptcy and Personal Injury

Bankruptcy is very important in personal injury cases. In fact, it’s so important, it could determine whether or not a plaintiff ever sees their settlement money. It doesn’t even matter who’s doing the filing. Ultimately, whether a plaintiff files for bankruptcy or the defendant, there’s still the possibility the settlement money won’t be acquired.

Okay… I know what you’re thinking. It would make sense for a court not to grant settlement money when the defendant files for bankruptcy, but why would that extend to the plaintiff? Many plaintiffs may find that bankruptcy is their only option for financial relief, so it would seem as if the law would be understanding.

Well, understand that bankruptcy does not completely excuse you from your debt. What it does is it liquidates your assets so your creditors get paid off. Or, if the bankruptcy is considered Chapter 13, the court will require the debtor to pay their creditors out of their own pocket over a short period of time. Either way, if you have assets around, it could be factored into the bankruptcy proceedings. And unfortunately, in some jurisdictions, personal injury settlements are considered an asset.

However, don’t give up hope just yet as the keyword here is ‘some.’ Many jurisdictions will not touch personal injury settlements, while others will require the settlements to be noted as disposable income. The latter is not as beneficial, but it will allow you to hold onto your money.
Yet, if you haven’t already filed bankruptcy, you need to talk with a financial analyst to determine your options. They will let you know whether you should just keep your bad credit score or start all over again with a bankruptcy. In some cases doing the former is better, though there is a slight risk of getting sued by your creditors. So, just be aware of that if you decide to wait out your debt.