You might be considering bankruptcy if you have serious debt problems and no feasible way out. If you are also taking legal action in a personal injury claim, the two cases might intersect, and you should legally prepare yourself for what is to come.
If you have already filed for bankruptcy, you should talk to a lawyer about whether now is a good time to begin a personal injury claim. There might be pros and cons to taking action now or waiting. If you file for bankruptcy and a personal injury claim, you may need to report your personal injury case and the damages you claim to the bankruptcy trustee. If you win your personal injury case, the damages award or settlement might be seized to pay creditors in your bankruptcy case. However, it might be possible to claim certain state or federal exemptions and save at least some of your personal injury proceeds from being used to pay creditors.
If you are in the middle of a personal claim and a bankruptcy case, call our bankruptcy lawyers at The Martello Law Firm, PLLC at (914) 685-6950 to schedule a free review of your legal situation.
Should I File for Bankruptcy if I Have a Personal Injury Claim Pending in New York?
It can be tough to be caught between two different legal actions. On the one hand, filing for bankruptcy might be your only way out of severe debt. On the other hand, a personal injury claim might help you get compensation for your injuries and reduce some of your debt. Before deciding anything, you should speak to a lawyer about your situation.
When you file for bankruptcy, certain assets might be used to pay off debts, including settlements or damages awards from personal injury lawsuits. In short, if you file for bankruptcy while you have a personal injury claim pending or after accepting an award or settlement, the compensation from your personal injury case might be used to pay debts in your bankruptcy case.
You might have little choice in what assets are seized. Depending on how large your personal injury settlement or award is, the bankruptcy trustee in charge of your bankruptcy case may or may not seize it.
What if I File for Bankruptcy Before Obtaining a Personal Injury Settlement or Award in New York?
When filing for bankruptcy, you are required by law to disclose information about all your assets. This includes information about potential assets, like settlements or damages awards from personal injury cases that are still pending. Even though you might not have been awarded any damages or accepted a settlement yet, you must disclose that you have litigation pending and the value of your claimed damages.
If you do not get any compensation from the defendant in your personal injury case, these assets are a non-issue, as the bankruptcy trustee cannot seize assets that do not exist. However, if you win your case or accept a settlement offer, it is fair game for the bankruptcy trustee to seize and use to pay your creditors.
If you file your bankruptcy case before filing your personal injury case, you and your attorney should inform the bankruptcy trustee about your damages claims. If you withhold this information, you might get in serious trouble for concealing assets.
Protecting Your Personal Injury Proceeds with Bankruptcy Exemptions in New York
An exemption is a certain amount of money the state or federal government will allow you to hold onto during bankruptcy proceedings. This can be very helpful for those who will likely lose most of their assets to bankruptcy. By protecting at least some of your assets, you can start over with a little money in the bank instead of flat broke.
There are state and federal exemptions to consider. Exemptions often allow bankruptcy claimants to hold onto personal assets like homes, vehicles, and personal injury settlements or awards. While federal exemptions provide for many of the same things, they tend to be more generous in some categories.
State exemptions in New York might allow you to claim a personal injury exemption, the limits of which vary based on the nature of the award and the case. According to D.C.D. Law § 282(3)(iii), for awards or settlements related to bodily injury – excluding non-economic pain and suffering – you may exempt $7,500.
The federal law pertaining to exemptions for personal injury settlements or damages awards is more generous. Under 11 U.S. Code § 522(d)(11)(D), you may exempt up to $27,900. The amount of money you can exempt from your bankruptcy case may increase if you file for bankruptcy jointly as a married couple.
Talk to an attorney about which exemptions you should claim and how to use them to benefit you the most. Numerous exemptions are available, including those designed to help you keep your home and vehicle. Unfortunately, you might only be able to claim some but not all exemptions and a lawyer can help you decide which are best for you.
Should I Drop My Personal Injury Claim if I File for Bankruptcy in New York?
Some bankruptcy petitioners who also have personal injury claims might consider holding off on pursuing their personal injury claims or dropping them so that the bankruptcy trustee does not seize a settlement or damages award. While this is possible, you should discuss whether it is a good option for your case with a lawyer.
There are pros and cons to putting your personal injury claim on hold. If you choose to hold off on filing a personal injury claim until your bankruptcy case is over, you only have so much time to do so. The statute of limitations on personal injury claims in New York is only 3 years. If bankruptcy proceedings take too long, you might lose your ability to file a personal injury claim.
On the other hand, some bankruptcy proceedings may be completed in a few short months, such as Chapter 7. Waiting to complete bankruptcy proceedings is understandable, as handling two cases at once might be difficult. Also, waiting to begin a personal injury lawsuit until your bankruptcy proceedings are over might mean you do not have to worry about having a settlement or damages award seized. It would be best if you spoke to an attorney about how to approach your case.
Call Our New York Bankruptcy Attorneys for Help
Contact our bankruptcy attorneys at The Martello Law Firm, PLLC by calling (914) 685-6950 to schedule a free review of your legal situation.