Getting a Recovery for Your Injuries When Defendant Becomes Bankrupt

A defendant’s bankruptcy could end your personal injury case.  It all depends upon the facts.

As a general rule, a corporation’s bankruptcy is a bad thing if you have a bodily injury claim or lawsuit..  It can either delay or end the case.

Here is a recent bankruptcy problem:

Our client was injured in a Bally’s gym.  We settled the claim before filing suit.  The client initially refused the settlement, but he re-considered and accepted it two months later.

At the time that we mailed the release to Bally’s, it filed for bankruptcy.  The payment of the settlement was stayed along with all other matters affecting Bally’s.  The settlement would not be paid until the bankruptcy court determined the amount that would be paid.

Finally, after about 1.5 years later, the bankruptcy court ruled that our client will be paid only 1% of the settlement offer that he accepted! 

In this case, as in all bankruptcies, the court has the power to determine how much of a settlement will be actually paid.  This is because the court must dole-out a bankrupt corporation’s limited, remaining assets on a fair and equal basis to all creditors, including landlords and suppliers.  Generally, an injured client could expect to collect only pennies on the dollar.

Also, in this case the defendant was self-insured.  There was no insurance to pay the claim.  All settlement funds had to come out of Bally’s very shallow pocket.

Also, a bankruptcy will greatly delay the payment of a settlement.  In another case involving another national company, Continental Bakeries, we had two clients in two different cases.  We  settled almost 4 years ago.  We have yet to be paid.

Therefore, a defendant’s bankruptcy can have a terrible impact on your case.  The individual facts of your case will have to be reviewed with your attorney.

Mark E. Seitelman, 7/14/10,


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