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Personal Injury Claims and Bankruptcy

~~Personal Injury Claims and Bankruptcy
Q: What is a Personal Injury Claim?
A: Personal Injury is a term used to refer to injury to the body, mind or emotions. The most commons types of claims that are referred to as Personal Injury claims or PI claims are car accidents, accidents at work, product defect claims and assault claims. However, it also includes medical and dental accidents as well as others not listed herein.
Example: You were driving on Highway 70 westbound and a car loses control, crosses over the median and collides with your vehicle. You now have a personal injury claim. If the accident happened on October 24, 2013 and your bankruptcy was filed with the court on October 31, 2013, the personal injury claim is an estate of the bankruptcy estate.
Q: My accident that gave rise to the Personal Injury Claim happened before the Bankruptcy, so the Bankruptcy has nothing to do with the Personal Injury Claim right?
A: Unfortunately that is wrong. In fact, because the incident that gave rise to the personal injury claim occurred prior to the bankruptcy being filed, it IS in fact part of the bankruptcy estate. Anything owed to you prior to filing, even if the money or property is not yet received, is part of the bankruptcy estate. This does not only apply to personal injury claims, but also applies to anything you are entitled to prior to filing. This includes tax refunds, settlements, bonuses earned but not yet received, inheritances, proceeds from sale of property, both personal and real property, etc.
Example: You were driving on Highway 70 westbound and a car loses control, crosses over the median and collides with your vehicle. You now have a personal injury claim. If the accident happened on October 24, 2013 and your bankruptcy was filed with the court on October 31, 2013, the personal injury claim is an estate of the bankruptcy estate.
Q: I have personal injury claim so I will just wait to sue them after the bankruptcy is over and then they cannot make me turn the money over right?
A: Good thinking, however that will not work. Anything owed to you at the time of filing of the bankruptcy is part of the bankruptcy estate regardless of when the money or property is actually received. Waiting to pursue a claim does not change that the money or property was owed to you at the time the bankruptcy case was filed. When money is received does not determine if it is part of the bankruptcy estate. Your bankruptcy case can be held open or reopened at anytime if assets of the bankruptcy estate are found or received by the estate.
Example: You were driving on Highway 70 westbound and a car loses control, crosses over the median and collides with your vehicle. You now have a personal injury claim. The accident happened on October 24, 2013 and your bankruptcy was filed with the court on October 31, 2013. The bankruptcy case is discharged on January 30, 2014. You wait until February 15, 2014 to contact and attorney to represent you in the personal injury case, or lets say you even wait until September, 2014; Guess what, it is still part of the bankruptcy estate.
Q: Ok so I know my personal injury claim is part of the bankruptcy estate, but what does that mean? Who gets the money?
A: If something is property of the bankruptcy estate it means it may be available to creditors to pay all or a portion of the debt owed to them. The trustee who is assisted to your case to administer on the estate will send out a notice of assets to your creditors. Your creditors will then be given a deadline to file a proof of claim with the court stating what is owed to them. Once the trustee receives the assets of the estate, usually the money from the personal injury claim, they will distribute the money on a prorated basis. Depending on how much money is received and how many proof of claims will filed with the court, the creditors may be paid in full or they will receive their prorate portion based on the amount of money that is owed to each creditor. The trustee will also receive a portion of the money to cover the trustee’s expenses and time spent on administering the estate. After all of this is done, the trustee must file a report with the court disclosing where the funds went. It must detail how much each creditor received based on the claims filed and discloses what the trustees fees were for administration of the estate. If there is any remaining money after all of the creditors and the trustee are paid, it will be return back to the Debtor.

 


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