April 8, 2020
Were you injured in an accident, but are also facing financial problems and considering bankruptcy? If so, this blog article will hopefully give you some clarity. Our California Los Angeles Bankruptcy Attorneys are experienced in both personal injury and bankruptcy matters. As such, they are perfectly qualified to assist individuals who are contemplating bankruptcy, but also have a pending personal injury case, such as a car accident in California.
You Will Need to List Your Personal Injury Claim as an Asset in Your Bankruptcy
Chapter 7 cases are designed to liquidate assets, and wipe out debt completely. On the other hand, the goal of a Chapter 13 bankruptcy in Los Angeles is to wipe some portion of the debt and/or pay other debt over time. However, in both kinds of bankruptcy cases, the debtor (person who files the bankruptcy) is required to disclose ALL debts and assets. No Exceptions. A personal Injury lawsuit filed in Los Angeles or in California is considered an “asset” for the purpose of bankruptcy; as such, the personal injury lawsuit must be listed in the bankruptcy schedules filed with the Court. The failure to list the personal injury claim (even if a lawsuit has not yet been filed) on bankruptcy documents, or the failure to notify the bankruptcy attorney of the existence of a personal injury claim, can result in sanctions imposed by the Court and a lot of trouble.
You Are Generally Be Entitled to Keep At Least a Portion of Your Personal Injury Compensation
Bankruptcy allows a Debtor to keep some assets, despite that technically all assets need to be “liquidated” in a Chapter 7 cases. Said assets can be kept using “exemptions”. In California, there are two (2) groups of exemptions that can be used depending on the specific case at hand. There are exemptions that specifically cover personal injury lawsuits. Although under some circumstances the entirety of personal injury award can be kept by the Debtor, in other circumstances, the debtor can only keep a certain amount of the money derived from the personal injury claim. Thus, if a Debtor has a high-value personal injury claim, the Debtor should be careful before filing a bankruptcy as the Debtor may lose some of his recovery by filing a bankruptcy. Each situation is different, and analysis of a debtor’s specific situation is needed before it is determined how much of the personal injury claim can be kept for the Debtor’s benefit.
The Trustee May Request More Information at the 341(a) Meeting
Every Debtor is required to appear at a “341(a) meeting”. This meeting often lasts only a few minutes, and some of the goals of this meeting is for the Trustee to ensure that the debtor is eligible for a bankruptcy, that the debtor is not hiding anything from the Trustee and creditors, and that the debtor is aware of the bankruptcy documents that were filed with the Court and ensures that those are accurate. During the 341(a) meeting, it is likely that the Trustee will ask the Debtor some questions about the personal injury claim, such as how it occurred, what type of injuries were sustained, who is representing the debtor, and more. The Trustee may also request that the Debtor provide documents relating to the personal injury claim.
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