08 Apr Personal Injury Cases and Bankruptcy in Florida
Filing for bankruptcy isn’t the first thing that people think about when they are dealing with a personal injury case. People injured in automobile accidents, slip and falls or other types of negligence claims often miss a great deal of work and therefore face financial difficulties. When their financial situation reaches the breaking point, they often turn to bankruptcy to ease the financial pressures.
But, what happens to their personal injury case if they file for bankruptcy protection, is often determined by the type of bankruptcy they file. Because most consumer debtors file a Chapter 7 or Chapter 13, this article will be limited to those two types of bankruptcy. Importantly, a pre-filling personal injury case is property of the estate in both Chapter 7 and Chapter 13. Accordingly, it must be properly listed and claimed as exempt (if allowed in your state).
Some states protect (exempt) personal injury proceeds.
But in Florida, the Chapter 7 Trustee will takeover the personal injury case, hire an attorney (usually the same attorney that the debtor had prior to filing) and continue the case for the benefit of the estate. Any proceeds from the personal injury case will be administered by the Chapter 7 Trustee.
In Chapter 13, the debtor must be willing to commit either a portion or all of the proceeds to the Chapter 13 Plan. This means that if the personal injury claims is settled during the bankruptcy, then the proceeds, or a portion of the proceeds must be turned over to the Chapter 13 Trustee to be given to the Creditors.
The decision to file a Chapter 7 or a Chapter 13 when the debtor has a pending personal injury case is huge and cannot be emphasized enough. Careful consideration must be given to many factors before making the determination.
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