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New Virginia Supreme Court Case Sheds Light On The Effect Of Bankruptcy On Personal Injury Claims

New Unpublished Opinion From the Virginia Supreme Court Helps Shed Light on the Effect of Bankruptcy on Personal Injury Claims

If an individual is simultaneously involved in both a bankruptcy filing and personal injury litigation, the results can potentially be disastrous for their personal injury claim, depending on the situation.  We previously discussed the impact of bankruptcy filings on personal injury claims in an October, 2013 blog, which can be found here.

With the assistance of appellate counsel, the attorneys at the Halperin Law Center were recently successful in taking one particular case out of the disaster category.  This particular situation involved a debtor (an individual already involved in bankruptcy) who had filed for chapter 13 bankruptcy protection and confirmed her chapter 13 bankruptcy plan prior to her disabling injury.  Based on her circumstances and the advice of her bankruptcy attorney, the debtor then converted the chapter 13 bankruptcy to a chapter 7 bankruptcy prior to filing a lawsuit in her personal injury action.  At the time of that conversion, the debtor knew that she had a workers’ compensation claim, which she listed on her schedules. She did not, however, understand or believe that she had a viable personal injury claim at that particular time.  As such, the debtor failed to update her schedules to include the unliquidated personal injury claim.  Even though she was unsure that she had a viable claim, she should have listed it as a potential claim.  When in doubt, include it.  The lesson to be learned? ALWAYS UPDATE YOUR SCHEDULES.  OFTEN.

In the instant case, Defense counsel was able to convince the trial court that the unliquidated personal injury claim was property of the bankruptcy estate at the time the debtor filed her personal injury action.   The trial court ruled that the debtor lacked legal standing to file her personal injury action in her own name, and dismissed the case.  The Halperin Law Center appealed the trial judge’s erroneous decision on behalf of the debtor and the Virginia Supreme Court overturned the trial court’s ruling and remanded the case back to the trial court.  Click here for the full text of the Supreme Court’s opinion.

Had the Virginia Supreme Court chosen not to hear this particular case, the injured client would have lost her ability to receive compensation for her injuries, damages and pain and suffering.  Given her astronomical medical bills and the fact that her injuries have rendered her permanently disabled, that would have been a disastrous result.

Whatever situation you may find yourself in, when bankruptcy and personal injury cases overlap, as they often do, open communication between your bankruptcy attorney and personal injury attorney may be the best to prevent finding yourself in the “disaster” category.