When a personal injury defendant files for bankruptcy, it can significantly impact the plaintiff’s ability to recover damages. This is because bankruptcy laws are designed to protect individuals who are unable to pay their debts, which can include judgments resulting from personal injury lawsuits.
The primary issue that arises when a defendant in a personal injury case files for bankruptcy is that the plaintiff may not be able to collect any awarded damages. When an individual files for bankruptcy, an automatic stay is put into effect. This stay prevents creditors from collecting on debts owed by the debtor during the bankruptcy proceedings. In this context, if a judgment has been made in favor of the plaintiff in a personal injury case before the defendant has filed for bankruptcy, this judgment would be considered a debt and would be subject to the automatic stay.
In some cases, however, certain types of debts are non-dischargeable under U.S. Bankruptcy Code 523(a), meaning they cannot be eliminated through filing for bankruptcy. Personal injuries caused by drunk driving accidents fall into this category as do those arising out of willful or malicious acts by the debtor.
However, even if a debt is deemed non-dischargeable, there still might not be enough assets available after other secured and priority creditors have been paid off during liquidation process under Chapter 7 Bankruptcy or reorganization plan under Chapter 13 Bankruptcy.
Another key factor is timing; when exactly did the defendant file for bankruptcy? If they filed before you initiated your lawsuit or before verdict was delivered in your favor then chances of recovering any compensation becomes slim unless your claim falls within exceptions mentioned above.
Furthermore, plaintiffs must also consider whether pursuing their claim against bankrupt defendants will result in substantial legal fees with little chance of payment at end due to limited assets left over after distribution among all creditors.
In summary, while it’s possible that plaintiffs may still recover some or all of their damages even if defendants file for bankruptcy depending upon nature and timing of claim, the process becomes more complicated and uncertain. It is always advisable for plaintiffs to consult with an experienced personal injury attorney and possibly a bankruptcy attorney as well to understand their rights and potential strategies in such situations.
Munley Law
510 Third Ave 2nd Floor, Pittsburgh, PA 15219
14125345133
