A personal injury award can be affected by many factors, and filing for bankruptcy is one of them. However, under Georgia law, there are exemptions available for clients who file for bankruptcy while their litigation is pending. Because of these exemptions, a personal injury client who files for bankruptcy may be able to keep some of the award, depending on when and how he or she files a claim.
Know that you must mention pending litigation when you file for bankruptcy because you are required to disclose any and all assets. If you do not mention pending litigation, you will need to amend your filing. Otherwise, you may be subject to additional fines and penalties – and the defendant in your injury case may try to have the case dismissed entirely.
There are three potential exemptions for personal injury claims. Under O.G.C.A. § 44-13-100, you may claim up to $10,000 for a personal injury claim (not including pain and suffering) or compensation for a pecuniary loss for yourself of for anyone of whom you are a dependent. Additionally, you may also be able to claim up to $1,200 under a “wildcard” exemption. Finally, you may also be able to exempt compensation for loss of future earnings to the extent reasonably necessary for your support.
If you have filed a wrongful death claim, however, the amount of money you can receive could differ. Under the law, the exemption can extend “to the extent reasonably necessary for the support of the debtor and any dependent of the debtor,” which means you may be allowed to keep a greater portion of your award than the typical exemptions allow.
Chapter 7 vs. Chapter 13
If you file for Chapter 7, you can keep the exempted money for yourself. The bankruptcy trustee will sell off any and all assets you have (that are not otherwise exempt) to pay off your creditors. If you can claim both exemptions for your injury award, then you can keep up to $11,200 of your award for yourself, regardless of how much money you owe. If the award was high enough to cover all of your debts, then any remaining money will be returned to you.
If you file for Chapter 13, however, the rules change. Chapter 13 bankruptcy is a type of repayment plan. Therefore, if you are awarded a settlement or verdict for your personal injury claim, the total sum of that award is added to your list of assets. This could increase the amount of money you must pay back in each payment. However, if the amount of the award is greater than the debts you owe, you may be able to keep more money by paying off those debts more quickly, or by reaching a settlement with your creditors.
Loss of consortium and its effect on your bankruptcy claim
If you are filing for bankruptcy, but your spouse has litigation pending for a personal injury lawsuit – even if the injury lawsuit has nothing to do with you – you can still make a claim for loss of consortium, which is a separate claim. If you choose to pursue this claim, the bankruptcy trustee could attempt to claim your spouse’s award as household disposable income.
This could be problematic, even if you do not file for loss of consortium, if the award check is made out to both you and your spouse (a tactic designed to ensure that you cannot sue for loss of consortium later).
In the end, pursuing both a personal injury lawsuit and a bankruptcy claim can be a challenge, but that doesn’t mean you cannot (or will not) receive at least some portion of your injury award. When you choose Harris Lowry Manton LLP to represent you in a lawsuit, you can rest assured knowing that we will work with your bankruptcy attorney to ensure that you can keep as much of your award as possible.