How does filing for bankruptcy affect my car accident case?

 by Steven M. GurstenFree Business Small photo and picture

We recently received a common question on the implications of filing for bankruptcy after a car accident or truck accident, and how each affects the other in Michigan.

Filing for bankruptcy will dramatically impact your car accident case.  It’s best to speak with an experienced auto accident attorney and a bankruptcy attorney to fully understand how each will affect the other before you make the decision to file for bankruptcy.

We hope the following information helps:

Q. My husband filed for bankruptcy after he got injured in a car accident several years ago. We won, but can’t get settlement money. We got discharge from Chapter 7. Our Personal injury case settled in May 2012. Fast forward 9 months and we still haven’t gotten our money. Finally, I found out that we owe this bankruptcy trustee nearly $40,000 in fees on top of the personal injury lawyer. I feel like we got lie to and cheated. Is this legal? I need some answers.

A. If you file for bankruptcy after an auto accident, then generally speaking, any money recovered from the personal injury settlement is the property or the bankruptcy trustee. The bankruptcy trustee determines how the money will be allocated. Ideally, your injury lawyer had discussed the allocation of settlement proceeds with the bankruptcy trustee before this, and received permission to settle from the trustee.

You need to talk to your attorney. It sounds like there probably has not been clear communication. But your attorney can probably call the trustee and get some answers for you –  if she doesn’t already have them.

Even if you get a discharge, the claim remains an asset of your bankruptcy estate. The trustee would administer those funds for the benefit of your creditors, and is entitled to commissions and fees that must be approved by the court. You will be entitled to any amount of the funds that are exempt in your case, or any access funds available after paying administrative expenses and creditor claims.

Related information:

How will bankruptcy affect your car accident?