Personal Injury Lawsuits in Bankruptcy Cases

Personal injury law and bankruptcy law are probably the most interrelated areas of law in my practice.  When people are injured they cannot work and when they cannot work they cannot pay their bills.  It does not take too long before they are facing repossession, foreclosure, and creditor harassment.  Filing for bankruptcy protection will stop all forms of collection however if the petition is not prepared correctly you could be looking recovering $0.00 in your case.  How does this happen? Non disclosure of the claim and/or suit.

In a Chapter 7 Bankruptcy the bankruptcy trustee will take inventory of all of your assets to try to pay the creditors as much as possible prior to discharge. In a Chapter 13 Case your assets will be considered when determining the details of the debt repayment plan.

You have a duty to truthfully disclose to the court all of your assets, including the following:

  • Funds received in a lawsuit;
  • Funds you expect to receive in a lawsuit; or
  • Funds to which you may be entitled, even if no lawsuit has yet been filed. 

The Doctrine of Judicial Estoppel: The Importance of Disclosing Personal Injury Cases In Your Bankruptcy Case.

Even if you are afraid that the trustee will take your personal injury settlement to pay off your creditors, you still must ensure to disclose the potential settlement to the bankruptcy court. If you fail to do so, the defendant in your personal injury claim may be able to prevail in the case due to a claim of judicial estoppel.  One of the most common questions that opposing counseling will ask of a plaintiff is “Have you every filed for bankruptcy” and, if that case was filed AFTER the accident, “Did you disclose this potential claim in that case”.  If you did not disclose your potential claim in your case you can be prevented from recovering.

It is only natural that, in any type of court case, a party will want to assume the position that is most favorable to them. This can cause problems, however, if a party has two different cases in which opposite positions may be the most beneficial. The courts will not simply allow a party to maintain two different positions in two different cases and the consequences of doing so can be harsh, as the court can dismiss a claim under the legal doctrine of judicial estoppel.

The Supreme Court of the United States has held that three main factors must be identifiable in order for judicial estoppel to apply:

First, a party’s later position must be clearly inconsistent with its earlier position.

Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party’s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled.

Third, courts ask whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.”

This doctrine can apply to any type of case—including Chapter 7 and Chapter 13 bankruptcy cases. In recent years, the issue has arisen in cases in which the bankruptcy filer has also had an impending or already pending personal injury case.

 

Bankruptcy cases can be extremely complex, especially if you have a pending personal injury claim, as well. It is critical to have an experienced Georgia bankruptcy attorney handling your case.  If you have any questions about a possible bankruptcy filing contact Saedi Law Group today and we can provide answers.

 

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