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Why You Need to Disclose Personal Injury Lawsuits During Bankruptcy in Texas

personal injury lawsuits during bankruptcy

Filing for bankruptcy has a substantial effect on personal injury claims. Navigating bankruptcy and personal injury cases is a tricky endeavor, so we’ve developed a quick guide to help you understand the importance of disclosing any possible personal injury lawsuits during bankruptcy. Let’s begin with two scenarios, John and Kate.


John was in a hardware store when a shelf of ceramic tiles collapsed and broke his foot. John’s broken foot disabled him from going to his job as a construction worker. John decides to file a personal injury claim against the hardware store to recover lost wages and medical bills. During the lawsuit, John’s debts have piled up and John files for bankruptcy.


Kate made some recent investments that didn’t pay off the way she had hoped. She now finds herself in a large amount of debt and chooses to file for bankruptcy. Three weeks before filing, Kate was involved in a minor fender bender. She was rear-ended at a stop light by another vehicle, but damages were minimal and she felt completely fine afterwards. Two months before filing, Kate missed work for a week after she slipped in a grocery store and hurt her back.


Disclosing Possible Personal Injury Lawsuits During Bankruptcy

This is an important part of the bankruptcy process. Many are unsure what exactly a possible lawsuit is. Essentially, it is any claim you could legally make, whether or not you actually wish to make it or believe that it is monetarily viable. Let’s look back at John and Kate to better understand why you should disclose any possible personal injury lawsuits during bankruptcy.


John is in the midst of a personal injury claim. Because he is filing for bankruptcy, his personal injury claim is put on pause. He discloses the lawsuit and a bankruptcy trustee takes over the claim and pursues the lawsuit in John’s place. He also discloses a fungal infection on his arm that he believes is a result of the gym he attends. The trustee decides not to pursue this case.


Kate does not disclose that she slipped at a grocery store two months before filing for bankruptcy and fails to disclose the fender bender because she did not feel that she could pursue damages.


disclose lawsuit in bankruptcy papers


Failing to Disclose Personal Injury Lawsuits During Bankruptcy

There are severe consequences for failing to provide information about a possible personal injury lawsuits during bankruptcy, and it is likely that an undisclosed claim will be discovered. Bankruptcy trustees are trained to speak with family, friends, coworkers as well as other means of discovery, including insurance agencies. If it is discovered that you have failed to disclose a possible personal injury claim during bankruptcy you could:

  • Be unable to file the claim in the future
  • Lose money if the trustee decides to pursue the case
  • Have your bankruptcy claim revoked
  • Be convicted of fraud or perjury


In Kate’s scenario, her bankruptcy trustee discovers her fender bender two weeks prior, but chooses not to pursue a personal injury claim. The trustee also finds out about the accident at the grocery store and decides to pursue the case. Depending on the bankruptcy claim, Kate could be subject to fraud or perjury and her bankruptcy claim could be revoked. Fortunately for Kate, her bankruptcy trustee chooses to forgo this option and continues to pursue a personal injury claim at the grocery store.


Receiving Personal Injury Settlement Money During Bankruptcy

It is possible that you may receive a portion of your personal injury settlement after filing for bankruptcy. The state of Texas does not exempt personal injury settlement money from being collected by bankruptcy trustees, but gives you the option to choose federal exemptions. Fortunately, the federal government places an exemption on personal injury claims of up to $22, 975. This means that you could still keep a portion of your settlement even during bankruptcy.


John’s trustee wins the lawsuit and receives an overall settlement of $55,000. John is able to keep $22,975 as an exemption and the remainder is disbursed to creditors. If there is a remainder afterwards, John will receive this money.


Kate’s trustee also wins the lawsuit, but because Kate did not disclose the lawsuit on her bankruptcy papers, she does not receive any exemptions and the entire settlement is used to pay off her debts.


settlement money during bankruptcy


Pursuing Personal Injury Cases After Bankruptcy

Another reason it is important to disclose any possible personal injury lawsuits during bankruptcy is so you will still receive the right to pursue the claims after filing for bankruptcy. Failing to report injury that took place before your bankruptcy claim means that pursuing the case later can easily lead to dismissal.


John’s infection on his arm worsens after bankruptcy and he chooses to file a personal injury lawsuit against his gym. The case is accepted because he mentioned the possible injury on his bankruptcy papers and his trustee decided not to pursue the claim. John wins a substantial settlement.


Kate realizes months later that her minor fender bender actually led to a significant neck injury. She files a personal injury claim, but it gets dismissed because she did not list the claim on her bankruptcy papers. Kate does not receive compensation for her injury.


Austin Personal Injury Attorney Can Help

Navigating personal injury claims before or after bankruptcy can be extremely difficult. It takes an experienced personal injury attorney to help you receive the compensation you deserve for your injury. If you have suffered a personal injury and would like more information on the importance of disclosing any possible personal injury lawsuits during bankruptcy, contact Colley & Colley law firm in Austin, Texas online or call us toll-free at 1-866-760-0358 for a free consultation on any injury related case today.