Individuals often have good Personal Injury claims; most arising out of Automobile accidents. Even when liability is clear and actual damages are proven Insurance delay and delay. Insurance companies have 2 reasons. First, they can use the money they will eventually payout for as long as possible. Second, they hope to wear out the Plaintiff who might well accept a lower settlement.
In Cook County, the average minimum time to settle a good case with the Defendant having a good insurance company is 3 to 4 years. If a law suit has to be filed the time before an actual settlement or trial will be far beyond 4 years.
In the meanwhile, individuals may have incurred a lot of debt and continue to incur debt. There are medical bills that pile up and there is loss of wages. Once a person gets behind debt problems frequently snowball.
CAN A PERSON WAITING FOR PI SETTLEMENT FILE BANKRUPTCY?
Actually the answer is “Yes” but it should be with the guidance of a lawyer with experience in Consumer Bankruptcy. A Bankruptcy can be filed and still protect the client’s PI case.
Illinois has as an exemption of $15,000 for Personal Injury (PI) cases. What that means is that the first $15,000 on a settlement goes into the client’s pocket. Actually, the $15,000 can generally be increase up to $19,000 by the use of the unused portion of $4,000 “wild card.”
When contemplating a bankruptcy one has to evaluate the PI claim in its most optimistic light.
If it is clear that the claim is worth less than $19,000 a Chapter 7 can be filed. For instance, if medical bills are about $1,000 and loss of wages are also about $1,000 and there are no permanent injuries the claim will eventually settle for less than $19,000. Each PI case, however, has to be separately analyzed.
What if the Automobile Accident or other Personal Injury claims may well be eventually settled for an amount greatly in excess of $19,000? How can one file a Bankruptcy and protect this valuable claim?
Our law firm, Robert J. Adams & Associates, has learned how to handle these situations. Our clients file a Chapter 13 case with a very low dividend and monthly payment with a provision that upon a payout of the PI claim the client retains the first $19,000 and the balance is paid over to the trustee for the benefit of creditors. If you complete the Chapter 13 with a discharge before the payout you get to keep all of the net proceeds.
When you file a Chapter 13 case with this provision you get to keep the lawyer of your choice and all the medical bills are put on hold until the payout.
Generally speaking the settlement or judgment will likely be in excess of about $30,000 before the client’s share is above $19,000. If the claim eventually pays out, say, $30,000 your PI lawyer will receive $10,000 and there would be other deductions.
CAVEAT
There are people who will file a Bankruptcy case without telling their lawyer that they have a PI case pending.
First of all, it is a criminal act.
Second, if the Chapter 7 trustee learns of the case the trustee will take over the case. When the trustee takes over the case they will strip the individual of the exemptions and move to deny the person of its discharge.
Honesty is always the best policy. Listing the PI case with an experienced lawyer who concentrates in Consumer Bankruptcy protects you and your claim.