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Bankruptcy and Your Personal Injury Case

columbia sc bankruptcy lawyerWritten by Lexington/Columbia Bankruptcy Lawyer, Lex A. Rogerson, Jr.

If you have any kind of claim that could produce money or property for you, it’s critical that you tell your bankruptcy attorney all about it.  Here’s why.

Everyone who files bankruptcy is required to file a set of schedules that list all their debts and all their property.  These schedules are filed under penalties of perjury.  Most people try to give accurate information because they want to be honest but also because failure to do so is a federal crime.  Rich and powerful people have gone to federal prison for hiding assets.

The Bankruptcy Code defines “property” very broadly.  It includes much more than obvious things like real estate, cars, jewelry, and bank accounts.  It also includes intangible assets like tax refunds, potential lawsuits, and claims for personal injury, workers compensation, social security, or child support.  So the simple reason you should disclose such property is to be honest and to comply with the law.

But there is also a more complicated but equally powerful reason.  Courts have developed a doctrine called judicial estoppel that can kill your personal injury case if you do not disclose it.

Judicial estoppel is based on every court’s desire to maintain its own integrity.  Judges believe people should not be able to assert one set of facts in one court and completely opposite facts in another.  Because people who file bankruptcy swear that their schedules accurately disclose all their assets, failure to list a claim in effect tells the bankruptcy court that you do not have a claim.  Then, when you try to prosecute the claim in another court, or before an administrative agency, you are saying that you do have a claim – the exact opposite.

With every case, there is someone on the opposite side – a defendant, an insurance company, or an employer – who has every reason to see the claim fail.  Defense lawyers regularly check to see whether claimants have filed bankruptcy and, if so, whether they disclosed their claim.  The defense lawyer will usually succeed in having any undisclosed claim dismissed.  It doesn’t matter how badly the claimant was hurt, how much money or work he has lost, or how deserving he is.  His claim is finished.

One final thing.  Many states have exemptions that protect most if not all of the proceeds of injury claims and other property.  This means that you, and not your creditors, get the benefit of these funds.  But many bankruptcy courts will disallow an exemption if the debtor does not promptly disclose the corresponding asset.  So this is one more way that failing to disclose a claim can lead to a bad outcome.

Don’t let this happen to you.  If you have a claim of any kind at all, discuss it fully with your bankruptcy lawyer before you decide to file, whether or not you are asked about it.  And if you do file, make sure it is listed on your schedules.

1 Comment

  1. Do You Understand Chapter 5 Bankruptcy? on July 31, 2013 at 12:00 pm

    […] lay world is that a cause of action doesn’t exist until you file suit.  Survey the cases on judicial estoppel and you’ll see how wrong they […]

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