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Personal Injury Claims In Bankruptcy
- by New Jersey Bankruptcy Attorney Bolko Rokicki

As a debtor, your right to sue someone for damages is an asset of the bankruptcy estate. Like any other asset, it must be documented and exempted on your bankruptcy petition. If it is not exempted, the Trustee may seize the right to sue on your behalf, with any proceeds from the lawsuit being disbursed by the bankruptcy estate to your creditors. Even if you haven't sued yet, or are unsure of whether you ever will, it is your right to sue that is an asset- and this right has to be scheduled on your bankruptcy petition.

An important thing to note is that your personal injury lawyer must be appointed by the Bankruptcy Court. Furthermore, prior to any disbursement of funds, the Bankruptcy Court must approve the settlement and disbursement.

In a Chapter 7 case, you will likely receive your bankruptcy discharge prior to resolving your lawsuit. If this happens, you must contact your Trustee once the lawsuit is finally settled. The Trustee will then file the appropriate paperwork with the Bankruptcy Court. If any part of the proceeds is not exempted, the Trustee will notify your creditors to file Proofs of Claim in order to receive disbursements. In the event that the creditors are all paid 100% of their debts, any excess proceeds will be returned to you.

In a personal injury lawsuit, a bankrupt debtor has a variety of exemptions that could allow him to retain the funds granted in a settlement. Apart from the general wildcard exemption, the debtor is entitled to $21,625 in exemptions for settlement proceeds representing pain and suffering for the injury. This means that after your attorney's fees are paid, you could exempt up to $21,625 (in addition to other possible exemptions) to keep for yourself rather than surrendering it to your bankruptcy Trustee.

Furthermore, any settlement proceeds representing lost wages may be kept by you, as all such proceeds are exempt.

 

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Due to the complexity of bankruptcy law and the severe consequences of any mistakes made in your bankruptcy petition (potentially resulting in a denial of discharge or losing assets that could have been exempted), it is highly recommended that you retain an experienced New Jersey bankruptcy attorney to represent you in NJ Bankruptcy Court. For a free bankruptcy consultation, call the Rokicki Law Firm at 973 - 671 - 8529. Free yourself from debt today!