Will bankruptcy affect my right to recover for injuries I previously suffered in an accident?

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Will bankruptcy affect my right to recover for injuries I previously suffered in an accident?

Subject to some exceptions, your right to recover damages for personal injury is part of your estate. Subject to the exemption rules, therefore, any money you end up recovering will go to pay off your creditors.

It is crucial that you claim the injury as property and must list it as such in the bankruptcy petition; otherwise you will be judicially stopped from bringing that lawsuit after you are out of bankruptcy.

If you were injured on the job, you probably have a worker’s compensation claim under state law or a like claim under federal law. Your right to receive compensation under these laws is fully exempt. Any right you might have to recover against a third party, however, would be part of your bankruptcy estate.

Similarly, your right to recover under laws that compensate victims of crime would be fully exempt.

Personal injury damages, not including damages for pain and suffering, are exempt to the extent of $18,450 if you elect the federal exemptions (and if your state even allows you to elect the federal exemptions).

Note that what matters is when the injury occurred, not when you file suit. If you were injured in an accident yesterday, your bankruptcy estate owns your right to recover for those injuries if you file for bankruptcy today and file a personal injury lawsuit tomorrow.

(Reviewed 11.14.08)

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