What Happens to Personal Injury Lawsuits During Bankruptcy?
If you are on the receiving end of a personal injury lawsuit (you are being sued), filing for bankruptcy can potentially exempt you from judgments against your assets or estate. Once you initiate bankruptcy proceedings, all relevant courts should be notified of your pending motions. The plaintiff in your personal injury suit may attempt to find relief from that stay and thus continue to prosecute the case even during the bankruptcy.
Alternatively, the plaintiff can wait it out until your bankruptcy case has been finalized and then re-institute proceedings. Of course, this tactic can easily backfire and result in the dismissal of the lawsuit. Finally, the plaintiff can attempt to move the injury lawsuit case to bankruptcy court.
What’s more, let’s say that you have filed a counter claim against your personal injury lawsuit plaintiff. It is possible to win your counter claim and simultaneously discharge the original claim brought by the plaintiff. Thus, you can end up with a positive cash settlement even though you were not the one who brought the suit to begin with and even if the plaintiff’s claim is larger than yours.
If you are conducting a personal injury lawsuit as a plaintiff, on the other hand, filing for a bankruptcy can greatly complicate your legal situation. Moneys which you garnish through your lawsuit may be subject to disbursal vis-a-vis your trustee appointed estate. However, in some circumstances, judgments in your favor through personal injury lawsuits may be protected from such disbursal.
Your bankruptcy attorney and civil suit lawyer should be able to walk you through the technicalities and help you prepare for your legal maneuverings. Make sure your various attorneys are in good communication with one another, and do your best to resolve the issues separately, to prevent the complexity of the synergized cases from interfering with your optimal settlement arrangement.
You may also work with your attorneys to time your bankruptcy strategically to put you in the best position to protect your assets and recover judgments/avoid high judgments. Just make sure that your strategic bankruptcy filing doesn’t cross the line into unethical territory, or your trustee may actually fail to grant you necessary reliefs.