This can easily run $3,000 to $10,000-which inevitably comes out of the personal injury lawyer’s attorney’s fee. Additionally, because many personal injury attorneys do not practice bankruptcy law and are not familiar with all of the traps and pitfalls, they will hire a bankruptcy lawyer to handle the bankruptcy matters. There is a substantial amount of time associated with the above procedures. Once the case is settled or a judgment is rendered, the attorney must set up and hold another hearing in bankruptcy to get the court’s approval of the distribution of the funds recovered. However, the attorney is not done with the bankruptcy court yet. Once approval is granted he can move forward with the state court’s personal injury claim. For a personal injury attorney to take your case, he must file a motion in bankruptcy court, give notice to all of the creditors so they have the opportunity to object, and then he must go before the bankruptcy court and get approval to act at the personal injury attorney for the Plaintiff. Nothing happens that affects a federal bankruptcy court case without the court’s approval. Must a Personal Injury Lawyer Obtain Bankruptcy Court Approval to Handle My Accident Case? This can result in a substantial increase in the time and cost of bringing the claim for several reasons. Thus, an extra burden falls upon the Plaintiff’s attorney to be sure everything gets done right in the bankruptcy case. Sadly, not all bankruptcy lawyers are savvy enough to be aware of this need. Sanction you, your attorney(s), or both.ĭoes Filing Bankruptcy Increase the Time and Costs of an Attorney Handling an Unrelated Civil Lawsuit?Īnytime you have a bankruptcy case and a personal injury case, your attorney has no choice but to contact your bankruptcy attorney and determine whether the personal injury claim was disclosed.Take over your personal injury action and turn it over to an attorney of their own choosing.Confiscate all funds you recover and distribute them amongst debtors.Furthermore, if you fail to disclose the claim, the bankruptcy court can take several actions including: However, it has been our experience that this limited exemption does you little good since the exempt part goes towards paying off medical expenses. Now, there is an exemption under the bankruptcy code for Chapter 13 that exempts personal injury recoveries except for funds pertaining to pain and suffering and economic losses. The reason for this is that it is an anticipated source of income that the bankruptcy court can use to satisfy debts. When a personal injury claim accrues after the date of filing bankruptcy, you must disclose this as an asset in an existing bankruptcy case. What Happens if a Personal Injury Claim Accrues After the Bankruptcy? If your bankruptcy case is concluded and you then try to pursue a non-disclosed asset later, failure to disclose can be pleaded as an absolute bar to bring the claim under the doctrine of equitable estoppel-a legal principle stating that you cannot claim a legal right once you have taken a position in another court that you did not have said legal right. However, failure to disclose a personal injury case can result in you losing all or part of the money recovered thereby or even completely losing the right to bring the claim. The disclosure may be amended and updated as the bankruptcy proceeds. When a person files for bankruptcy, they are required by Federal Law to disclose all assets. What Can Happen if I Fail to Disclose a Personal Injury Cause of Action t a Bankruptcy Court? Your attorney-client contract on the personal injury claim is now void until approved by the bankruptcy court. That asset belongs to the bankruptcy estate. Thus, if your personal injury cause of action accrues prior to the date of filing bankruptcy, it is no longer yours. You can transfer or assign it away just like any other piece of property. A personal injury cause of action is an asset. They now belong to the bankruptcy estate unless they fall under certain exemptions. What Happens to My Personal Injury Claim if I File Bankruptcy?Īs of the date you file for Chapter 13 bankruptcy, all of your assets cease to be yours. Either way, the case no longer belongs to you and any attorney-client contract for the pursuit of that claim is basically void. Either the claim becomes an asset of the estate of a subsequently-file bankruptcy, or the claim becomes a source of income that the bankruptcy court may use to satisfy your debts and obligations. When you file for Chapter 13 bankruptcy, it affects a personal injury claim in one of two ways depending upon which is filed first.
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