Will a Bankruptcy Filing Affect My Personal Injury Case?

by | Dec 19, 2013

In Kocher v. Campbell, 282 Va. 113 (2011), the Supreme Court of Virginia made it clear that it is imperative for the Virginia personal injury lawyer know if a client has filed or is going to file for bankruptcy. Chapters 13 and 7 bankruptcies are treated differently with respect to personal injury claims, but for the sake of this post we will only be referring to Chapter 7.

  • First, it is essential that a plaintiff list her personal injury action in the bankruptcy proceedings because it is an asset. This is likely true even if the plaintiff has not yet filed suit.
  • Second, it is imperative the plaintiff list the action at its actual value (e.g., not “$0.00 or $1.00). The reason for this is because when the claim is listed in the bankruptcy proceeding, and a value is assigned to it, the personal injury plaintiff has made a declaration in court proceedings about the value of her case. The personal injury plaintiff then runs the very real risk of later being estopped from trying to obtain a large verdict because she has already averred the case is worth almost nothing.
  • Third, the personal injury action must then be exempted from the bankruptcy proceedings. Unless the personal injury action is exempted from the bankruptcy proceedings, the action belongs to the trustee, and the trustee is the proper party plaintiff—that is, the action is no longer the plaintiff’s to prosecute. By exempting the action, the action returns to the plaintiff and the plaintiff remains the proper party. A failure to coordinate a plaintiff’s bankruptcy proceedings with her personal injury claim could result in a dismissal of her personal injury case due to the statute of limitations running, or some other legal mechanism.

It is imperative that a potential client or current client promptly report any past, pending or planned bankruptcy proceedings. This is only a very cursory overview of the importance of the relationship between bankruptcy and a personal injury claim and it is important to seek sound legal advice to be sure the personal injury action is not compromised.

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