Injured and Pursuing a Personal Injury Claim? How Bankruptcy Affects Your Settlement Skip to main content

You are here

Injured and Pursuing a Personal Injury Claim? How Bankruptcy Affects Your Settlement


Car accident

Injured in a car accident? You may be eligible for a personal injury claim

Image source: Flickr User Rian Castillo

If you have been injured in a car accident, by medical malpractice or are anticipating another type of personal injury settlement (asbestos, workers' compensation, etc.), and are also planning to file bankruptcy, you should let both your bankruptcy and personal injury attorney know. Why? So they can work together to get you the best possible relief on both fronts. Here are answers to some of the questions we've been asked by clients dealing with both debt and personal injury...

#1 Do I have to reveal that I am currently pursuing a personal injury claim when filing bankruptcy?

Absolutely yes. You must disclose all current assets, earnings and any anticipated changes in your assets or income. This includes personal injury lawsuits. Even if you don't think you'll get a lot of money from the suit, you still have to include it. Your bankruptcy filing can be dismissed, or worse, you can be accused of fraud by your bankruptcy judge if you hold back on this important information.

#2 Do I have to reveal that I am eligible for lawsuit damages even if I haven't filed?

Also yes. If you have been in an accident in your vehicle, at work or have incurred other injuries or damages that entitle you to file a claim for likely damages, you should tell your bankruptcy attorney. This doesn't mean you have to file a lawsuit, but it's all part of the information that goes to the Trustee and judge involved in your case, as this is considered a potential asset.

#3 If I'm awarded damages for a personal injury case, will I get to keep any of the money?

Likely, yes, you should be able to keep some of the money. You'll have better results with your bankruptcy and personal injury attorney coordinating together. The claim and any settlement will end up in the hands of the Trustee, but that doesn't mean that you won't get some of the money. In North Carolina, personal injury settlements are typically exempt from seizure, with some exceptions.

#4 How do I protect my personal injury settlement from creditors?

Federal law exempts nearly $23,000 from your bankruptcy assets (double that for married couples), but in North Carolina, this provision is even more generous. As long as you do not deposit a settlement check in with your other bank accounts used to pay bills, your money should remain exempt. But if you co-mingle funds, the Trustee can access them. Further, workers' compensation claims, restitution for crimes committed against you, wrongful death claims, life insurance benefits and loss of future earnings claims should be exempt. If, however, you are reimbursed in your settlement for medical bills that are part of your bankruptcy filing, that money will likely become part of your bankruptcy assets payable to creditors.

#5 How can I know if my claims will be exempt?

Because every bankruptcy filing and every personal injury case are unique, your best bet is to consult an experienced North Carolina personal injury attorney with a solid track record of good results, as well as a NC bankruptcy expert. These two professionals can work together to give you the best advice on when to file both the injury claim and bankruptcy petition to get you the best debt relief solution and the most advantageous personal injury settlement.

For a free consultation on your personal injury or workers compensation claim, contact Riddle & Brantley and for expert bankruptcy advice, contact the law offices of John T Orcutt. Working together and with deep knowledge of North Carolina law, they'll work hard to protect your rights under personal injury law and fight for the best debt relief solution possible.

Debts Hurt! Got debt? Need help? Get started below!

What North Carolina County Do You Reside In?