Marietta Injury Lawyer Blog
Dealing with personal and health care issues following a car accident is stressful enough. If your financial situation has also deteriorated to the point that you need to file for bankruptcy, you should understand the impact that might have on any personal injury claim arising from your accident. If you are not careful, the bankruptcy may let a negligent defendant escape responsibility for your injuries.
Make Sure to List All Potential Lawsuits
When you file for bankruptcy you must provide the court with a list of all of your known assets. This includes any pending or potential personal injury claims. A claim is considered part of your bankruptcy estate if the cause of action arose prior to filing. In other words, if you are injured in a car accident on January 10 and file for bankruptcy on January 20, any personal injury claim you might have must be listed on your Chapter 7 petition, even if you do not file a personal injury claim until January 30.
If you accidentally omit a personal injury claim from your initial bankruptcy filing, you must file an amended petition. Otherwise, the defendant in your personal injury case may try to dismiss the case. The Georgia Court of Appeals addressed this in a recent decision,Kamara v. Henson. The plaintiff sued the defendant for medical malpractice. The alleged malpractice took place in 2011. The plaintiff filed for Chapter 7 bankruptcy protection in March 2012, but did not sue the defendant for malpractice until early 2013.
The plaintiff did amend her bankruptcy petition to reflect the lawsuit, but in the interim the defendant sought and won summary judgment from the trial court on the grounds the plaintiff was “estopped” from pursuing her case. The Court of Appeals reversed, however, noting the plaintiff made a good-faith effort to comply with the law.
What Happens to My Personal Injury Award?
So what happens to any personal injury award you actually receive during bankruptcy? Under Chapter 7, you are only allowed to keep a certain “exempt” portion of the judgment for yourself. The rest is used to pay off your creditors.
Under Georgia law, the normal exemption for personal injury awards is $10,000. (You may also be entitled to keep up to an additional $1,200 under Georgia’s “wildcard” exemption.) This covers damages for bodily injury, not pain and suffering. However, if the award is the result of a wrongful death action, the bankruptcy court may exempt as much as is “reasonably necessary for the support of the debtor and any dependent of the debtor.” This same “reasonably necessary” exemption also applies to awards for “loss of future earnings.”
What if I File for Chapter 13 Instead?
In a Chapter 7 bankruptcy, a court-appointed trustee liquidates your non-exempt assets and pays off your creditors to the extent possible. A Chapter 13 bankruptcy, in contrast, involves negotiating a repayment plan with your creditors. This means any personal injury award you receive while your Chapter 13 case is pending may be used to increase your payments.