Automobile Accidents And Personal Injury Claims And Bankruptcy

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.

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