Filing bankruptcy with an insurance claim
When financial hardship hits, people sometimes turn to the bankruptcy laws for relief. This is not unusual for those with personal injury claims in particular, especially when the injured person can no longer work. Generally, people hire a bankruptcy attorney to guide them through the bankruptcy process. If you’re thinking of filing bankruptcy with an insurance claim, you should understand how your claim may be affected.
Will filing bankruptcy affect your claim?
There are many factual scenarios that can happen, so please speak with your attorney about your specific situation. In general, a bankruptcy filing will discharge or reorganize debts you have, and a court will base the bankruptcy plan on the amount of your debts and assets.
Though you may not think of it immediately, an insurance claim can possibly be considered an asset, so make sure you tell your bankruptcy attorney about any current or potential claims. Often, a person filing for bankruptcy can request that the bankruptcy court grant a waiver and not consider the claim. However, if the waiver of the bankruptcy claim is not obtained in the initial disclosures during the bankruptcy filing, the bankruptcy court might be able to take proceeds from the personal injury claim, leaving you in a difficult position.
Steps you need to take
If you are considering filing for bankruptcy with an insurance claim, or if you have a current insurance claim and recently finalized a bankruptcy filing, please make sure you tell both your attorney involved in your insurance claim and your bankruptcy attorney to ensure you are protected. When you hire an attorney, always keep them informed of any recent bankruptcy and any potential upcoming bankruptcy filing. Similarly, when you hire a bankruptcy attorney, always tell your bankruptcy attorney about any recent, current, or potential insurance claims.
Even if you do end up filing for bankruptcy with an insurance claim, it doesn’t necessarily mean that the bankruptcy court will take all of the compensation you’re entitled to. There are a number of factors that will determine how that situation is handled, including the amount of the settlement, the type of bankruptcy filed (chapter 7 or 11), and the amount of debt discharged. The worst thing you can do is to not give your bankruptcy attorney your complete financial situation, or fail to inform your insurance attorney that you’re being forced to consider bankruptcy. If you are unsure, please discuss it with your attorney. Failure to disclose any major settlement can have severe penalties for you.
If you have an insurance claim, contact the lawyers at Corless Barfield Trial Group for a free consultation about your options.