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Personal Injury Claims and Bankruptcy: Navigating a Complicated Relationship

Personal Injury Claims Bankruptcy Relationship
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When filing for bankruptcy, it’s important to understand the effect it may have on your personal injury claims. Bankruptcy can have a significant impact on the amount of money you receive from a settlement or jury award. It’s important to understand how bankruptcy could affect your settlement and what steps you can take to protect your rights.

The most common type of bankruptcy is Chapter 7, which is a liquidation bankruptcy. This type of bankruptcy allows you to discharge most of your debts, including medical bills, credit card debt, and other unsecured debts. When you file for Chapter 7 bankruptcy, the court will appoint a trustee to manage your assets and debts. The trustee will then sell your assets to pay off your creditors.

When it comes to personal injury claims, the trustee may be able to take a portion of your settlement or jury award to pay off your creditors. This is known as a “preference” or “clawback” action. The trustee may also be able to take a portion of your settlement or jury award to pay off your attorney’s fees.

It’s important to note that the trustee will only be able to take a portion of your settlement or jury award if it is considered to be an “asset” of the bankruptcy estate. This means that if the settlement or jury award is considered to be “exempt” from the bankruptcy estate, the trustee will not be able to take it.

In some cases, you may be able to protect your settlement or jury award from the trustee by filing for Chapter 13 bankruptcy. This type of bankruptcy allows you to keep your assets, including your settlement or jury award, while you pay off your creditors over a period of time.

It’s important to note that if you file for Chapter 13 bankruptcy, the trustee will still be able to take a portion of your settlement or jury award to pay off your creditors. However, the amount that the trustee can take will be limited to the amount of your disposable income.

It’s also important to note that if you file for Chapter 13 bankruptcy, you may be able to negotiate with the trustee to reduce the amount of your settlement or jury award that is taken. This is known as a “cramdown” and can be a great way to protect your rights.

It’s important to understand that filing for bankruptcy can have a significant impact on your personal injury claims. It’s important to speak with an experienced bankruptcy attorney to understand how bankruptcy could affect your settlement or jury award and what steps you can take to protect your rights. An experienced attorney can help you understand your options and ensure that you receive the maximum amount of compensation for your injuries.

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