Getting a Recovery for Your Injuries When You Have Declared Bankruptcy

When filling for bankruptcy, be sure to list your personal injury case as an “asset”.

In the event that you fail to list your claim, then you could be guilty of bankruptcy fraud.  The ultimate penalty can be dismissal of the personal injury case.

For example:

Josh Jones has a mountain of hospital bills from his illness  as well as other debts, such as a car loan and credit cards.  He decides to file for bankruptcy.

Jones also has a potential claim for medical malpractice against the hospital.  He claims that his poor health is due to the hospital’s medical malpractice.

Jones files for bankruptcy to gain protection against the hospital bills and other debts.  However, he fails to mention his potential medical malpractice claim to his attorney.  The potential medical malpractice claim is not listed as an asset in Jones’s bankruptcy filing.

Jones’s petition is granted, and his debts to the hospital are discharged along with other debts, such as credit cards.  He then files a medical malpractice lawsuit against the hospital.

In the malpractice lawsuit, the hospital claims the defense that the hospital’s obligations to Jones were discharged in the bankruptcy.  Furthermore, by reason of the bankruptcy, any claim for malpractice belonged to the Trustee appointed by the bankruptcy court.  The hospital claims  that Jones cannot sue in malpractice.

In the malpractice case the court dismisses the case on the ground that Jones was precluded from bringing the malpractice suit due to his failure to disclose the bankruptcy.

Therefore, if you are going to file for bankruptcy be aware that:

  1. A failure to disclose your personal injury claim can result in you being precluded from recovering on your accident or malpractice case;
  2. You must disclose actual claims as well as potential claims (of which you are aware);
  3. A failure to disclose may be corrected if the correction is made before the debts are discharged; and
  4. You must be truthful with your bankruptcy attorney regarding any potential claims.

For a further discussion see “The Bankrupt Patient and Malpractice Litigation.” 

IMark E. Seitelman, 7/13/10,


3 Responses to Getting a Recovery for Your Injuries When You Have Declared Bankruptcy

  1. dokemion says:

    The four bankruptcy filings are chapters 7, 11, 12 and 13. Chapter 7 is the most common of all the filings. Chapter 7 requires you to liquidate your finances. You will have to start over from scratch after filing bankruptcy chapter 7. A trustee liquidates your assets and any monies made from the sale are applied towards your debt. After the sale of your assets, any monies received are distributed among the creditors. Any left over debt is forgiven and you will be debt free. If you have debts that were not forgiven, you cannot include them on any future bankruptcies you may file.

    • Doemion, thank you for your comments.

      Bankruptcy can be a complicated mess.

      Not every bankruptcy will end a client’s case or reduce the client to taking pennies on the dollar.

      For example, if defendant has insurance, then the accident/malpractice case may proceed after the bankruptcy court lifts the stay. Generally, the client’s recovery will be limited to the insurance coverage limits.

      When an injured client faces a bankrupt defendant, a case by case determination must be made as the ulitmate chances of recovery.

  2. rulett jatek says:

    Great idea, thanks for this post!

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