Personal Injury Claims and Filing Bankruptcy (Part One)

If you find yourself in this situation, it’s vitally important that you advise your bankruptcy attorney of your personal injury claim.

Let’s face it. Injury often causes financial problems. If you can’t work, you don’t get paid, or you get paid only what your disability insurance covers—usually a small portion of what you were earning prior to the injury. And that’s if you’re lucky and don’t get jerked around by the insurance company.

Financial problems, in turn, often lead to bankruptcy. I see this frequently in my Charleston bankruptcy practice.  If that happens to you, there are some important things you should know.

Having Two Lawyers is Like Having Two Doctors

If you have two doctors and one prescribes something the other doesn’t know about, that can be dangerous. It’s the same with two lawyers. You might think that your bankruptcy lawyer doesn’t have anything to do with your personal injury claim, but he does. You need to make sure each lawyer knows about the other.

Your Injury Claim is Property of Your Bankruptcy Estate

When you file bankruptcy, any assets you have become property of your bankruptcy estate. Don’t panic! This doesn’t mean you lose everything you own. It does mean, however, that you must list all your assets and then claim your “exemptions” in them. “Exemptions” are property you are allowed to keep. For example, in South Carolina you are allowed a $51,450 of home equity, a vehicle with a value up to $5,150, and many other exemptions.

But here’s the rub. If you don’t list the asset, you can’t exempt it. Only disclosed assets are abandoned (released) from your bankruptcy estate. Your bankruptcy trustee will specifically state this at your bankruptcy hearing.

So if you don’t disclose your personal injury claim in your bankruptcy, you don’t own it. That means it can’t be released from your bankruptcy estate and remains an asset for the bankruptcy trustee to recover.   If the insurance company’s attorney finds out about your failure to disclose your personal injury claim in your bankruptcy case, he’ll use that to get your personal injury case dismissed.

In addition, it’s a felony to withhold information in your bankruptcy filing. Actually, it’s two felonies: bankruptcy fraud and perjury—lying under oath. Both are serious crimes and can result in prison sentences.

In “Personal Injury Claims and Filing Bankruptcy (Part Two)”, I’ll discuss another problem you’ll encounter and an unfortunate case from right here in South Carolina.


(This is a guest post written by Russell A. DeMott. Click on his biography below for more information about Mr. DeMott’s bankruptcy practice.)

Russell A. DeMott is a bankruptcy lawyer practicing in Charleston, South Carolina. He represents clients in Chapter 7 and Chapter 13 bankruptcy.

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