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What Happens to Personal Injury Claims in Bankruptcy?
Personal Injury Claims in Bankruptcy

What if you’re thinking about filing bankruptcy but you have a personal injury claim pending?

Whether the personal injury claim is in court, delayed by insurance settlement holdups or even if you haven’t decided to pursue the claim but the statute of limitations hasn’t run, this is an asset.

It also doesn’t matter whether it’s a fender bender or a case with serious injuries.  Injury claims, or any claim representing potential dollars in the bank must be disclosed when filing bankruptcy.

Disclose Personal Injury Claims in Bankruptcy

All assets must be disclosed by those filing bankruptcy, even when the precise dollar amount of the ultimate settlement is presently unknown. Bankruptcy Schedule B requires listing of all assets.  The potential personal injury recovery must be identified and noted as ‘contingent’ in that the final amount is honestly unknown.

Avoiding disclosure in bankruptcy is the wrong decision. The feds have resources and when they find out there was an undisclosed asset, they can take it away, object to the bankruptcy discharge, revoke the discharge and/or prosecute for bankruptcy fraud.

Exempt the Personal Injury Case

Various exemptions exist in bankruptcy law to potentially protect certain value in a personal injury claim. But, they’re limited.

State exemptions vary from state to state. A wildcard exemption can often be used to claim an exemption for the potential personal injury settlement, depending on how much wildcard is available. It also depends on which law firm you consult with. For example, using a personal injury attorney in sarasota fl can bring across different exemptions to a law attorney in Texas.

There are also federal exemptions available to apply to personal injury lawsuits, but they can be tricky to apply:

  • A “wildcard” exemption at the time of this blog is $1,225 plus any unused portion of the federal homestead exemption up to $12,250. Married people filing jointly can double these amounts.  But, this assumes you don’t need the exemption to protect home equity or other property.  Also, whether federal exemptions are available depends on your state.  Some state laws allow use of federal bankruptcy exemptions instead of your state exemptions, some don’t.
  • Another federal exemption specifically for personal injury cases exempts a payment, not to exceed $15,000, on account of personal bodily injury not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent.
  • And there’s the federal exemption covering a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

Who Controls Personal Injury Claims in Bankruptcy?

If you file for bankruptcy, your personal injury attorney must get permission from the Trustee to continue with the case.

Chapter 7: If the personal injury case settles or goes to judgment for more than available exemptions, then the Chapter 7 trustee collects the money, pays the exempt amount to you, but the remainder is distributed to creditors. If there’s anything left after creditors are paid in full, it’s yours.

Chapter 13: In a Chapter 13 bankruptcy, when there’s a recovery, you must amend your plan if it did not provide for full payment to all creditors, turning over nonexempt funds to your creditors.

Filing Bankruptcy with a Personal Injury Case Outstanding

Other complications include the fact that if the personal injury claim is in court, it needs to be identified on another form, the ‘Statement of Financial Affairs”. In order to legally protect as much as possible of a pending personal injury claim if a bankruptcy filing is necessary it’s wise to retain an experienced bankruptcy attorney to navigate through the rules and procedure of bankruptcy law.

For more on bankruptcy exemptions: click here.

Footnotes make a blog less reader friendly.  But, the three federal bankruptcy exemptions noted above all fall under 11 U.S.C. 522 (d), sections (5), (11)(D), and 11(E) respectively.


  1. In a chapter 13 for over 2 years now, got in a car accident last April 2016, can my trustee take all my personal injury settlement and leave us with nothing? What kind of exemptions can I apply for to keep my money???

    1. Thank you for reading and responding to my blog article on personal injury claims in bankruptcy. I am not licensed in Indiana and this is important because each state has its own exemptions and each state’s bankruptcy trustees have different practices. So I highly recommend that you retain an experienced bankruptcy attorney in your jurisdiction. I can say generally that you can claim whatever wildcard exemption that you may have but also that yes you absolutely disclose the car accident claim to the trustee.

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Attorney Myers is a member of the American Trial Lawyers Association, Massachusetts Academy of Trial Lawyers, and New Hampshire Trial Lawyers Association. The Law Offices of Andrew D. Myers offer a broad range of legal services in personal injury cases in Massachusetts (MA) and New Hampshire (NH) areas.

The information on this web site is offered for informational purposes only. It is not offered as, and does not constitute, legal advice. Laws vary widely from state to state. You should rely only on the advice given to you during a personal consultation by a local attorney who is thoroughly familiar with state laws and the area of practice in which your concern lies. This web site must be labeled advertisement in some jurisdictions.