If you are injured in a personal injury accident, you can file a claim against the negligent party. The compensation awarded will help present and future expenses along with lost wages. Yet, personal injury claims take some time for settlement, which leaves you burdened by unpaid debts and hence seeking bankruptcy relief.
You may wonder, “Can a personal injury claim affect my bankruptcy?” If you face difficulties in your personal injury claim and bankruptcy, click on learn more before making any final decisions.
Can a personal injury claim affect my bankruptcy?
Suppose you are filing a claim against other parties for damages or having other pending lawsuits against another party. In that case, an exception is applied where you will receive some sort of financial award for the injuries.
In Chapter 7 of bankruptcy, most of the assets will turn into the property of your bankruptcy estate. It includes assets such as cash or physical property, as well as intangible assets. A bankruptcy trustee will determine which debts you need to pay from your assets and which can be discharged. The trustee has access to sell assets to repay the creditors, and the amount reason for you depends on how much you owe to your creditors.
In chapter 13, it is asked to restructure your debt and let the repayment of debt at a reduced rate to your creditors. The trustee will calculate your total income and determine the value of assets and the total debt. If your personal injury cause of action is before the date of filing bankruptcy, it will no longer be yours. The assets will then be under bankruptcy estate.
Settlements received before the repayment schedule are also considered assets to your bankruptcy estate. But the trustee can not seize your assets to compensate your debt, unlike in chapter 7. However, you are required to pay your debt in a considerable amount to the non-exempt assets you own.
Possibilities of losing personal injury settlement in bankruptcy
Many states allow debtors to protect their injury awards under a few federal bankruptcy exemptions. Bankruptcy is complicated. Adding personal injury claims and mixing it makes it more difficult. If you are filing a claim or have a personal injury award and considering bankruptcy, it is vital to have expert advice from a personal injury attorney.
The time of your lawsuit and the award structure will significantly affect the accessibility of the bankruptcy trustees in canceling debt obligations.