Injury Claims and Bankruptcy

Editor’s Note: Remember, an Atlanta injury attorney can help with accident related issues. If you are considering bankruptcy following a serious accident, a bankruptcy attorney is the appropriate type of lawyer even if your debts are due to your accident.

Scholle Law Firm is an Atlanta, Georgia personal injury law firm. Our office handles motor vehicle accidents, injuries related to premises liability and additionally we work with people that have been injured in accidents at their jobs or while they were working. In this article we discuss some general information on bankruptcy and how it relates to personal injury claims.

Our office does not handle bankruptcy claims and in the case of any of our clients ever having a questions about bankruptcy we would refer them to another colleague that specializes in that type of law. Bankruptcy is not appropriate in every situation and in many cases personal injury attorneys can help client’s resolve all of their accident related medical bills without a bankruptcy. If you have a personal injury claim and are concerned about how it will result in medical bills, lost wages and other negative consequences to your finances, please contact an Atlanta injury attorney at our office for a free case evaluation.

Bankruptcy and Personal Injury

When life happens, it can hit you hard. Unexpected accidents are a prime example. The likelihood of there being a domino effect increases after an accident. It can be significant and it can cause you to get hit multiple times with tough situations that impact your every day life. It can feel like you just cannot catch a break, but everyone needs a break every now and then so they can hit the refresh button. Hence the potential need for bankruptcy following a serious accident or injury case.

Again, one way that life hits you hard is by an automobile accident or other personal injury matter. For example, you are hurt but the accident was not your fault. The negligent driver was on the phone texting and rear-ended you causing you to become injured. Therefore, you are well within your right to file a personal injury claim against the negligent driver to be compensated for the damage and pain and suffering that was caused.

Unfortunately, life has hit you hard again right after the accident causing you to have significant financial problems from things like medical bills and lost wages. At this point you may be considering bankruptcy. Most people think injury cases generally result in a call to one lawyer, the lawyer that will help with your insurance claim. However, in some cases you may need to speak to a bankruptcy lawyer as well. They can advise you about the financial relief that is offered through bankruptcy and how it can assist with getting rid of the debts that you have accrued.

While an Atlanta injury attorney in our office cannot help you file a bankruptcy petition, we can certainly refer you to a bankruptcy attorney and advise you that once you have file for bankruptcy, your personal injury claim will be impacted. If you file bankruptcy with an active personal injury claim you can still eventually obtain the proceeds from the claim, but how it is dispersed and the final amount that you receive will be depend on what a bankruptcy judge and your bankruptcy trustee signs off on.

The bankruptcy trustee becomes the administrator of your finances once you file bankruptcy. They will make determinations that you are required to follow. While bankruptcy is a way to legally protect yourself from creditors, it does come with some mandated constraints. Most of this is all governed by the Federal Bankruptcy Code. There are many different types of bankruptcies:


Chapter 7:
Liquidation

Chapter 13: Reorganization (Repayment Plan)Business Bankruptcy – For those with large amounts of debt and assets

Chapter 11: Large ReorganizationBusinesses can file Ch. 7 if they are liquidating all their assets.Other Types of Bankruptcies:

Chapter 9: MunicipalitiesReorganization for cities, towns, school districts, etc.

Chapter 12: Family Farmers and FishermenLike a Ch. 13 but it is more flexible with higher debt limits

Chapter 15: Used in Foreign Cases. It involves those from different countries.

Most people end up filing a Chapter 7 or a Chapter 13 (consumer-focused bankruptcies) which we will focus on. So, what happens with the personal injury claim after you have filed bankruptcy?

In the state of Georgia, the amount that you can exempt in a personal injury claim is ten thousand dollars. O.C.G.A 44-13-100(1)(11) states the exemption as:

A payment, not to exceed $10,000.00, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent;

Additionally there is another relevant part in O.C.G.A. Section 44-13-100(a)(6), which is called the “wildcard” exemption. It says a debtor (person filing bankruptcy) can take another $5,600.00 exemption (if s/he does not use his/her homestead exemption in full) on the personal injury claim.

Chapter 7 Bankruptcy

A Ch. 7 bankruptcy filing is what is called a liquidation. This is basically were you tell the trustee that I want a “fresh start” because you have proven that you have experienced an undue or unforeseen hardship causing a burden for you to pay back your creditors. This could mean that you may have to sell some or all your assets, if you have any, since there is not enough of the exemptions to protect them which may or may not be the case. The estimated amount of time that you may endure in this case is usually about 4-6 months long.

Chapter 13 Bankruptcy

A Ch. 13 bankruptcy filing is more of a reorganization. This is where you develop a payment plan and pay back creditors that way.  In this case, you get to keep your assets if you pay what you owe into the case or however it is setup to pay down your debt unless you decide to get rid of them. This type of filing is a lot longer than a Ch. 7 where you may be in it for about 3-5 years.

Timing Matters

The timing of the filed personal injury claim can determine how it will be handled in a Ch. 7. If you filed a personal injury claim before you have filed bankruptcy, then the proceeds become a part of the estate and the trustee can hold a claim against it. Now, if you have filed bankruptcy and then the personal injury claim was filed afterwards, the trustee has no control over it and the claim is processed as normal because what occurred from the time of filing and before is what they look at.

Let’s say that you filed bankruptcy after you filed the personal injury claim, the trustee will include the possible proceeds from that claim as an asset. With the personal injury claim exemption in Georgia, you get to exempt up to ten thousand dollars, but there is the possibility of protecting and exempting more if you expect to receive a higher amount from the settlement.

 A Ch. 13 bankruptcy filing can be a little more complicated when it comes to claiming your personal injury claim. In a Ch. 13, the timing of when you have filed your personal injury claim does not matter. Whether it was filed before or after your bankruptcy filing, it becomes a part of the estate that the trustee controls, therefore, it must be stated in the petition.

You can use the same exemptions as in a Ch. 7 including the wildcard exemption but the only difference here is that you may not be able to keep some or all of it. Even after you have exempted it, you will have to provide proof to the trustee on what you need the proceeds for.

Let’s say you can only use the maximum exemption of ten thousand dollars, so you will have to provide proof on what the money will be used for and make sure it adds up to that amount or the difference will be put into your bankruptcy case which pays off your debt quicker. If you only have proof for six thousand dollars, then the four thousand dollars that you could not provide proof on will be put into your case.

Final Thoughts

It is always best to communicate to your bankruptcy attorney about your personal injury claim because they will need to request documents from your Atlanta injury attorney. The court will have to approve counsel and your personal injury attorney will have to be “hired” by the judge so that they can discuss how the settlement will be handled. If you do not do this, then it could stall the disbursement of your settlement even after you received a discharge from the bankruptcy judge.

The trustee will find out if you are involved in a personal injury claim so always state it when you initially file or amend the petition once you have filed your claim if you are in an active case. The purpose of bankruptcy is to help you financially and to either pay all or most of your debt or discharge it so you can have some sort of relief. The trustee looks at the personal injury claim as money that can be used to pay off your debt but the way that it occurred allows them to be more lenient towards you keeping a certain amount.

Contact an Atlanta Injury Attorney

You want to make sure that you have a great personal injury attorney that can fight for you and get you the best results. That is what Scholle Law has been working hard at for over two decades. Our Atlanta injury lawyers are dedicated advocates that work hard to fight for their client’s interests. We understand that the consequences of an accident are not limited to injuries. We understand that the financial impact is something that often creates a struggle for most of our clients.

While our firm cannot handle a bankruptcy case, we can help you find an attorney that can speak to you about your options regarding a potential bankruptcy. Depending on your individual situation bankruptcy may be a solution for you. It may not. The only way that you will know is to speak to an attorney. If you are struggling from a recent injury and looking for representation, contact our office for a free case evaluation. It will never cost you anything to see how we can help. Call us today!

Call us @ (678) 921-3320 or contact us online for a free case review! We answer our phones 24/7 (including holidays and weekends) and an Atlanta injury attorney will take your call today!