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Los Angeles Bankruptcy Lawyers / Blog / Bankruptcy / Bankruptcy and Personal Injury Lawsuits

Bankruptcy and Personal Injury Lawsuits


Navigating the financial aftermath of a personal injury, whether you’re the plaintiff seeking compensation or the defendant facing a lawsuit, can be incredibly challenging. Adding bankruptcy into the mix complicates matters further, raising questions about the impact on ongoing or potential personal injury lawsuits. At Wadhwani & Shanfeld, we understand the complexities at this intersection and are committed to shedding light on the subject. Contact our Los Angeles bankruptcy attorneys to explore the specific implications of filing for bankruptcy when involved in a personal injury lawsuit.

For Plaintiffs: Filing for Bankruptcy During a Personal Injury Lawsuit

Filing for bankruptcy as a plaintiff in a personal injury lawsuit can significantly affect your claim. Once you file for bankruptcy, all of your assets, including potential lawsuit settlements or awards, become part of the bankruptcy estate. This means the bankruptcy trustee has control over these assets and can use them to pay creditors.

However, not all is lost. Bankruptcy law provides exemptions that can protect a portion of your personal injury settlement or award from being used to satisfy creditors. The specifics of these exemptions vary by state and the type of bankruptcy filed (Chapter 7 or Chapter 13). It’s crucial to disclose your personal injury lawsuit in your bankruptcy filing and work with an experienced attorney to navigate these exemptions.

The timing of your bankruptcy filing in relation to your personal injury lawsuit can also play a critical role. Filing for bankruptcy before receiving a personal injury settlement may allow for better planning and use of exemptions. Conversely, filing after receiving a settlement could subject the entire amount to the bankruptcy estate, depending on your state’s exemptions and the nature of the settlement.

For Defendants: Facing a Personal Injury Lawsuit While in Bankruptcy

For defendants, filing for bankruptcy introduces the automatic stay, a provision that halts most collection actions and legal proceedings against the debtor. This stay can temporarily pause the personal injury lawsuit against you, providing breathing room to reorganize your finances. However, the plaintiff can request the court to lift the stay for the lawsuit to proceed.

A critical concern for defendants is whether bankruptcy can discharge the debts arising from a personal injury lawsuit. Generally, Chapter 7 bankruptcy can discharge debts from personal injury lawsuits unless the injury was caused by drunk driving or intentional harm. Chapter 13 bankruptcy may also provide avenues to manage these debts through a repayment plan, potentially resulting in a discharge upon completion of the plan.

Impact on Insurance 

It’s important to note that bankruptcy does not necessarily affect insurance coverage for personal injury claims. If you have insurance that covers the claim against you, the insurance company may still be liable up to the policy limits, regardless of your bankruptcy filing.

Navigating Bankruptcy with a Personal Injury Lawsuit

Whether you’re a plaintiff or defendant, full disclosure of your personal injury lawsuit or a potential lawsuit is mandatory in your bankruptcy filing. Failing to disclose this information can lead to severe consequences, including the dismissal of your bankruptcy case or allegations of bankruptcy fraud.

Legal Representation

Navigating the intersection of bankruptcy and personal injury law requires specialized knowledge. Engaging attorneys who are well-versed in both areas is essential to protect your interests, whether you’re seeking compensation for an injury or defending against a lawsuit while managing your debts.

Strategic Planning

Understanding the strategic implications of filing for bankruptcy in relation to a personal injury lawsuit is crucial. This includes considering the timing of your filing, the potential impact on your assets or liabilities, and the best path forward to protect your financial future.

Contact Wadhwani & Shanfeld

Whether you’re a plaintiff seeking justice for your injuries or a defendant facing claims while dealing with financial distress, understanding the implications of bankruptcy on your situation is crucial.

At Wadhwani & Shanfeld, we’re dedicated to providing our clients with the guidance and support they need to navigate these challenges effectively. If you’re involved in a personal injury lawsuit and considering bankruptcy, or if you’re in bankruptcy and facing a personal injury claim, we’re here to help you understand your options and make informed decisions.



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