Protecting Personal Injury Claims in Bankruptcy Cases

Description

Any party in a personal injury matter--plaintiffs, defendants, co-parties, future claimants--could file bankruptcy before, during, or after a civil action is initiated or a claim arises. That filing has an impact on the personal injury claim. Personal injury attorneys can be overwhelmed in deciding how to respond, fearing the case is over, or giving up options and rights.

Bankruptcy cases involving personal injury claims are complex, but there are ways to protect against personal injury, wrongful death, and similar claims. Counsel need to understand whether the claim is property of the estate and if the automatic stay applies, what it applies to, and whether any party is attempting to enforce claims against the debtor. Counsel also need to know which non-bankruptcy courts have concurrent jurisdiction to decide which kind of stay issues. Bankruptcy Rule 2004 permits broad discovery of the debtor's financial condition, and such examinations often yield valuable information beyond what is in the debtor's schedules.

Counsel representing a plaintiff who seeks bankruptcy relief should make certain that the matter is correctly and fully disclosed. Failure to disclose is the biggest threat to personal injury claims. Attorneys representing the plaintiff may be asked by a trustee or a debtor in possession to continue or initiate a personal injury lawsuit. Contingency fee arrangements are not forbidden. If the plaintiff is the debtor, it may be able to exempt the lawsuit.

Counsel will also want to understand the settlement process and what happens to settlement proceeds paid to a plaintiff before, during, or after bankruptcy, including the order in which medical liens, secured creditors, tax claimants, and other creditors' claims might be paid.

Listen as this panel discusses the consequences of bankruptcy on a personal injury case and what action counsel for either the plaintiff or defendant can take to preserve the claims and defenses.