What happens When a New York Personal Injury Plaintiff Files For bankruptcy, And Why Should He Try Like Hell To Avoid It?

Woman's and Man's hands with money isolated over white

I am sure you can guess why many of our severely injured personal injury victims tend to fall behind in their bills. Hint: They can’t work! And while their debts piles up, their personal injury claim may not settle or get to trial for many months to come. Solution? They can just get a loan from us, their lawyers, right? Wrong! As lawyers we are prohibited from lending our own clients money — it’s considered a conflict of interest. Our hands are tied! So what do we do?

We do everything in our power to keep them afloat, except lend them our money. And we have many tools to get the job done: We can help them apply for New York State disability insurance and social security disability. We can help them get loans from family or friends by making a legal promise to those lenders to pay them off first – even before we pay our client – from any settlement or judgment we obtain. If our clients need more economic help still, we can refer them to a commercial claim lender who will provide cash in exchange for a “lien” against the personal injury case. The “lien” entitles the lender to be paid first from the personal injury settlement or judgment, plus interest.

And if all else fails, there’s bankruptcy. But we do everything we can to keep our clients from filing for bankruptcy. That’s a last resort. Why? After all, bankruptcy wipes clean most or all the client’s debts, giving our client a “fresh start”. What’s wrong with that?

What’s wrong with it is that our client’s personal injury claim passes from our client to the bankruptcy trustee, who now owns it. Our client is no longer our client. Instead, it is the bankruptcy trustee. That’s because the personal injury claim was an “asset” which, along with all the other assets of the bankruptcy petitioner, now belongs to the bankruptcy trustee. Now any compensation we obtain for pain and suffering or lost income won’t go into our injured client’s pocket – it will bypass him almost completely and land instead in the bankruptcy trustee’s pocket, who will then take his fee and distribute what remains to the bankruptcy creditors.

But there’s still hope for our injured client. If the settlement or judgment is big enough, and all the bankruptcy creditors get paid off in full, then our injured client get what’s left over. I should also mention that the injured plaintiff gets the first $7,500 of the net personal injury settlement or judgment before the bankruptcy trustee touches a dime. The injured plaintiff thus never goes away empty handed.

But still, representing a client who has suffered a severe injury who may end up with only $7,500 in compensation does not sit well with us. That’s why, if you are our personal injury client, we will do everything we can to keep you out of bankruptcy. We would rather pay the big bucks to you than to a bankruptcy trustee!

Keep safe!

Mike Bersani

Email me at: bersani@michaels-smolak.com                   I’d love to hear from you!

Michael G. Bersani, Esq.

michaels-smolak.com
Central NY Personal Injury Lawyers
Michaels & Smolak, P.C.

1-315-253-3293

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