An important consideration when deciding whether to file a civil action against someone whose negligence may have caused you personal injury is the possibility that the person may file for protection under federal bankruptcy laws.
Depending on the nature of the underlying legal dispute, bankruptcy may or may not provide protection from lawsuits or from collection of judgments. However, in typical personal injury cases based upon general negligence, the federal bankruptcy laws may be advantageous to a defendant.
Consider the following example:
Your car is rear-ended by an uninsured driver, which causes you severe injuries and major damage to your vehicle. The uninsured driver was not under the influence of alcohol or drugs at the time of the accident. If you sue the uninsured driver for injuries caused by this collision, but the person files for bankruptcy relief and has no assets of value, the federal bankruptcy laws may protect the driver from ever having to pay a cent.
How can this happen?
If the uninsured driver files for bankruptcy relief before a lawsuit is filed. The uninsured driver will be relieved of any debt or liability related to the accident, even if the liability has yet to be proven. Also, under the automatic stay provisions of the federal bankruptcy laws, you may not file a lawsuit against the uninsured driver while the bankruptcy is pending.
When the bankruptcy case is completed and all the debts are relieved, or “discharged,” you will be forever barred from seeking compensation from the uninsured driver for the injuries related to the accident (assuming the debt is listed in the bankruptcy).
If the uninsured driver files for bankruptcy relief after a lawsuit is filed. Under the automatic stay provision of the bankruptcy laws, you must cease any further action on the lawsuit while the bankruptcy is pending, unless the bankruptcy court grants permission to continue prosecuting the action (which is rarely granted). And, if an order of discharge is granted, you may not continue prosecution to collect damages from the defendant.
If the uninsured driver files for bankruptcy relief after a judgment is rendered. If the uninsured driver has no attachable assets, the judgment will be essentially worthless. You will not even be able to attach the defendant’s bank accounts or garnish wages.
If you or someone you love has been injured, our Texas personal injury attorneys have the experience and resources to help you through this difficult time and obtain just compensation for your injuries. Please call 800-248-6000 or contact us for a free consultation.