In a Wreck, Need a Check? Personal Injury Claims in an Arizona Bankruptcy

If you have been in an car accident or injured and now have a claim against the person who did the injuring (is that a word??), then what happens to this claim if you file for bankruptcy here in the great State of Arizona?  Well, it will all depend on whether you were injured before or after your bankruptcy was filed and whether you are filing a chapter 7 or a chapter 13 bankruptcy case.

If you were injured in a car accident that happened before your bankruptcy case was filed, the claim you have against the other person is part of what is now as your “bankruptcy estate”.  The bankruptcy estate contains all of your assets you have on the day your bankruptcy case is filed.   Essentially, the right you have to sue that person is an asset in your case.  This is true even if you haven’t filed a lawsuit prior to filing for bankruptcy or if you don’t receive a settlement until after your bankruptcy case has been filed.

For example, if you were injured in a car accident on March 1st, filed bankruptcy on March 31st, and then received a settlement of $10,000 on April 15th (I am fully aware that process is nowhere near that quick!), then those funds would belong to your creditors and would be distributed by the bankruptcy trustee to your creditors.

If we change the events around we get a different result.  If you file for bankruptcy on March 1st, get injured in a car accident on March 31st, and then receive a settlement of $10,000 on April 15th, then those funds are yours to keep IF you are in a chapter 7 bankruptcy.

If, however, you are in a chapter 13 bankruptcy, you may have to negotiate some sort of payment to your creditors through your chapter 13 bankruptcy trustee.

I know it is painful – not only to get injured, but to have to give up those settlement funds when you are at a point when you could really use those funds.  Whether you get to keep those funds is all about the timing of your injury and the timing of your bankruptcy.