What Happens to a Personal Injury Settlement in Bankruptcy?

bandaidMost individuals preparing to file an individual Chapter 7, 11 or 13 are concerned about their physical assets. However, there are certain intangible assets that are important to consider as well.  If you were involved in an auto accident and you are expecting a settlement payment or monetary judgment, do you get to keep those funds in your bankruptcy case?

If your personal injury case is pending, you will relinquish control over that lawsuit when you file a personal bankruptcy. In fact, your personal injury lawyer must file an application in your bankruptcy case to be employed as counsel for the trustee, since the trustee is now the real party in interest in the personal injury case.

You should also be aware that if a settlement offer is made in your personal injury case, you do not have the authority to accept or decline it. You must notify the trustee and obtain bankruptcy court approval to settle the matter. Once your personal injury settlement is approved, the trustee will disburse the settlement proceeds.. This means that you will only receive payment from the settlement if all of your creditors are paid in full.

As you can tell, mixing a personal injury case and a bankruptcy filing can complicate matters. Thus, if you have a personal injury lawsuit that is pending and you are considering filing for bankruptcy protection, it is essential that you contact us to discuss the best strategy for you.

Please keep in mind that every case is different. If you are planning to file a bankruptcy and you have a personal injury case pending, contact our office to schedule a no-cost consultation by completing the form on this website or calling us at (954) 280-5066.

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