At the Botelho Law Group we have attorneys that work with a variety of legal matters. For example we have an attorney that primarily focuses on personal injury cases as well as attorneys who spend much of their time with bankruptcy matters. This gives us a unique perspective when addressing client’s problems, as many times multiple areas of law interact with each other. Many firms that “specialize” in personal injury cases do not spend much time in the bankruptcy court and there are potential problems that may arise or have to be addressed that they may not be aware of when a personal injury client is facing bankruptcy. The attorneys at Botelho Law Group are able to address these issues, and it is my hope that this blog post will help shed some light on the interaction between a personal injury case and a chapter 7 bankruptcy.
In an earlier blog post I focused on how exemptions work to help a client keep their property in a bankruptcy. That subject comes into play when dealing with a personal injury case in bankruptcy. The law suit associated with a personal injury case is considered an asset, or property, of the bankruptcy estate. This means that the same way an automobile or jewelry can potentially be liquidated to pay some of the debts in a bankruptcy if they are not considered exempt, the money received in a settlement or a judgment by a court could also be used to satisfy some of the debt. Just as with an automobile or jewelry there are different exemptions amounts that apply to the category of property and these vary depending on if the bankruptcy lawyer uses state or federal exemptions. The main concern is the “value” of the personal injury case. If the potential proceeds from the personal injury case is small enough the trustee of the bankruptcy case will very likely “abandon” it and not administer the case.
If the client is facing a potentially large monetary gain from the personal injury case the trustee in the bankruptcy matter will want to administer the injury claim as an asset (property) of the bankruptcy case. While the trustee would be involved to some extent in the personal injury case, that case will not be transferred to the bankruptcy court as it is a “non-core” proceeding that involves matters not directly dealing with rules of the bankruptcy court. That being said, the rules of the bankruptcy court will have an effect on some procedural matters that your bankruptcy or personal injury lawyer will have to deal with as well as the potential payouts relating to a settlement or judgment. This includes the personal injury lawyer having to be approved by the bankruptcy court and with some trustees any settlement negotiations will require review. If a settlement is reached the trustee of the bankruptcy will need to bring a motion to have the bankruptcy court approve such. The settlement is often times initially paid to the trustee who then distributes the money to creditors if the exemption rules do not cover all of the proceeds and then what money is left would of course be paid to the client via the trustee.
Working with an experienced attorney or law firm that handles both personal injury cases and bankruptcy will help assure that the process goes smoothly and as much money as possible makes it into the client’s pocket.
Joseph F. Botelho, Esq.
BOTELHO LAW GROUP
Attorneys At Law
901 Eastern Ave.
Fall River, MA 02723
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