If you've been in a car accident and you have a case pending for your injuries, the process can take some time. Unfortunately, if you're not able to work during that time, it can also lead to serious financial concerns. If your debts are piling up and you're struggling to make ends meet, you might be considering a bankruptcy filing. Before you file, though, it's important to understand that bankruptcy could have an effect on your currently pending injury case. Here's a look at what you need to know about how that bankruptcy filing can affect your auto accident case.
You Must Disclose the Case
If you have a pending accident case, you have to disclose that case as part of any bankruptcy filing. Since there's the potential for a cash settlement in a car accident injury case, it's viewed as an asset to the bankruptcy court. If you don't tell the courts about your case in the initial disclosure, you may forfeit any money that your auto accident attorney may have otherwise obtained for you, and it could even cause you to have your bankruptcy petition refused. If you talk with an accident attorney before you file the bankruptcy, he or she may even be able to work with your bankruptcy trustee from the start. However, the way that your accident case is handled will vary based on what type of bankruptcy you file.
Filing Chapter 7
If you choose to file a Chapter 7 bankruptcy, it will significantly alter your auto accident case. Your bankruptcy trustee will become the party of interest, taking over your role as the plaintiff in the case. The bankruptcy trustee will be the representative of your bankruptcy estate, and he or she will have complete control over litigation and settlement negotiations. You won't have any control over the proceedings of the case at that point.
Before the bankruptcy trustee can settle the case, the settlement will be presented to the bankruptcy judge for approval. The bankruptcy judge will then order that your creditors be paid first, which could mean that you don't get anything from the settlement at all. In fact, the bankruptcy trustee has no obligation to negotiate a settlement that nets you a payment, because their primary concern is ensuring that your creditor balance is paid in full.
It's also important to note that if you file for a Chapter 7 bankruptcy, any medical bills you incur after your filing won't be discharged in the bankruptcy. This means that you'll be responsible for paying those medical costs yourself. If you were significantly injured in the accident, you may find yourself coming through the bankruptcy case and still facing significant medical costs due to the accident. You won't be able to go back to the other person's insurance company for any more money in that case, because your bankruptcy trustee obtained the final settlement. Make sure that you aren't facing any serious long-term treatments that could prove costly before you decide to add a bankruptcy filing to your pending auto accident case.
Filing Chapter 13
Your accident injury case is handled differently when you file for Chapter 13 bankruptcy. This is a reorganization filing, and it's often a better choice if you have a pending personal injury case. Chapter 13 will stop your collection calls, giving you some reprieve from the emotional strain and anxiety. Particularly if you've been out of work for a bit due to the accident, this can be a significant factor.
The other thing of note about filing Chapter 13 is that your accident case won't automatically be handed over to the bankruptcy trustee. Instead, you get to select an injury attorney who will represent both your interests and those of the bankruptcy trustee together during the settlement process. That attorney must be approved by the bankruptcy court before you can continue with your accident case.
The negotiation and settlement process for your accident case will continue as it would even if you hadn't filed for bankruptcy. You and your accident attorney will come to a settlement agreement with the other party and won't typically have to seek the approval of the bankruptcy court for any decisions other than the final settlement offer.
The bankruptcy court will then review the accident settlement offer to ensure that it is acceptable to the courts. Once the settlement is approved, the bankruptcy court distributes the settlement between you, your attorney's fees for the accident attorney, and the bankruptcy estate. You can continue reading more about this topic by following the link in this sentence.