More about Personal Injury Award in Case of Bankruptcy

  • Bankruptcy

What Happens to Personal Injury Award in Case of Bankruptcy?

An injury sustained due to negligence or accident can cause immense trouble for people. They are often struggling financially due to overwhelming medical debts and are often accompanied by long durations of being out of work and in severe pain. Many of such people, with the help of excellent personal injury attorneys, sue the negligent party for a personal injury award. However, if the same person is struggling financially and is contemplating filing for bankruptcy, one of the major concerns they have is; what happens to their personal injury award in such a situation? Do they get to keep the entire personal injury claim or a part of the award?

Different consumer bankruptcy types and their effect on monetary damages obtained through personal injury claims

If you are struggling with finding the best possible recourse to take care of your debts, call 888-297-6023 to ask counsel from bankruptcy lawyers. According to Los Angeles based bankruptcy lawyers Recovery Law Group consumers can file for bankruptcy under two chapters; Chapter 7 (liquidation bankruptcy) and Chapter 13 (wage earner’s plan). Both chapters have different requirements, procedures to deal with your debts and ways of handling personal injury claims.

Chapter 7 bankruptcy

In this case, any unsecured debts of the debtor like credit card bills, medical bills, personal loan, etc. can be discharged by the bankruptcy court; while any non-exempt assets the debtor has, are sold to pay off secured creditors. Since in this type of consumer bankruptcy, the court allows discharge of most unsecured debts, the debtor needs to claim an exemption to keep the property. The personal injury award becomes a part of the bankruptcy estate while the case is pending.

The California Code of Civil Procedure offers two basic provisions for exemption of personal injury damage. As per Section 704.140, the wide-ranging exemption is provided, showing that the personal injury award is essential for the support of the judgment debtor as well as their spouse and dependents. Section 704.150 provides an exemption in case of wrongful death claim award. Section 703.140(b)(11) on the other hand provides an exemption of wrongful death awards deemed necessary to support survivor’s dependents and personal injury award up to $24,060. Since both schemes have their own benefit, it is important for a bankruptcy filer to choose wisely (section 703 or 704).

Chapter 13 bankruptcy

In this type of bankruptcy, the court reorganizes the debt obligations of the bankruptcy filer; some debts are paid back, some are reduced in amount while some others are discharged. In this case, the debtor is paying a certain amount of the debts back as per the court-approved repayment plan. Thus, they are entitled to keep some or all payment they receive from a personal injury claim. However, the amount they can keep for themselves depends on a few issues including what is to be paid to unsecured creditors.

Many times, debtors might choose to exempt their award, depending on their situation. Since laws are often complicated, it is important to hire the best legal minds to take care of issues like bankruptcy and personal injury claims. While the expertise of a personal injury lawyer lies in trying to get the best compensation for your injuries, a bankruptcy lawyer California can help save as many of your assets as possible. It is important for a person who is undergoing both issues simultaneously, to have the best legal counsel for both matters. The bankruptcy lawyer and personal injury lawyer can work in tandem so that their client gets and retains most part of the personal injury award during their bankruptcy.