Filing for bankruptcy is a difficult decision that no one wants to make. However, when you’re facing overwhelming debt and can’t find a way out, it may be the best option for you. If you have a personal injury action pending or anticipate receiving a settlement, filing for bankruptcy can be even more complicated. In this blog, we’ll discuss how to file for bankruptcy with a personal injury action.
Firstly, it’s important to understand that if you file for bankruptcy while you have a personal injury case pending, your personal injury claim becomes part of your bankruptcy estate. This means that your bankruptcy trustee will have control over your claim and may use the proceeds to pay off your creditors. Additionally, if you receive a settlement or judgment after you file for bankruptcy, the bankruptcy trustee may also take control of those funds.
There are two types of bankruptcies that are commonly filed by individuals – Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves the liquidation of assets to pay off creditors. If you file for Chapter 7 bankruptcy, your personal injury claim will be part of your bankruptcy estate and may be sold by the trustee to pay off your creditors. However, in some cases, you may be able to keep some of the proceeds from your claim, depending on the amount of your exemption.
On the other hand, Chapter 13 bankruptcy involves creating a repayment plan that lasts for three to five years. During this time, you make monthly payments to a bankruptcy trustee, who then distributes the funds to your creditors. If you file for Chapter 13 bankruptcy, your personal injury claim may not be sold by the trustee, but the trustee may still use the funds to pay off your creditors.
It’s important to note that bankruptcy does not discharge all types of debt. For example, if you owe child support, taxes, or student loans, those debts will not be discharged by bankruptcy. However, bankruptcy can help you eliminate unsecured debt such as credit card debt, medical bills, and personal loans.
If you have a personal injury claim pending or anticipate receiving a settlement, it’s important to speak with an experienced bankruptcy attorney to help you navigate the process. Your attorney will be able to evaluate your situation and help you determine the best course of action for your specific case.
In addition, if you’re considering filing for bankruptcy, it’s important to disclose your personal injury claim to your bankruptcy attorney. Failure to disclose your claim could result in your bankruptcy case being dismissed or your discharge being denied.
Finally, it’s important to note that bankruptcy can have a negative impact on your credit score. However, if you’re facing overwhelming debt and can’t find a way out, filing for bankruptcy may be the best option for you. If you have a personal injury claim pending or anticipate receiving a settlement, it’s important to speak with an experienced bankruptcy attorney to help you navigate the process and ensure that your claim is protected.
If you are worried about your personal injury action and are contemplating filing bankruptcy, it is important to speak with an experienced bankruptcy lawyer that can review your case and determine what options you have available to you.
Contact Karra L. Kingston Esq. If you are considering bankruptcy.