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Should You Settle a Personal Injury Case Before or After You File for Bankruptcy

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  • 01-15-2018, 09:03 AM
    Taipans
    Should You Settle a Personal Injury Case Before or After You File for Bankruptcy
    My question involves bankruptcy in the state of: Missouri

    (Sorry this is so long)

    Short story: I will soon be filing Ch7 and live in a state (MO) that does not allows any exemptions from settlements. None. My settlement isn't huge, well huge in regards to the amount of debt I will be discharging at least (so it wont pay them off). It should be about 20k in my pocket after my lawyers cut. I could go on and on about how I got into my situation but I am sure no one wants to hear it (common loss of income etc). So far I have met with two different BK attorney's over the past few weeks and both gave me contridicting answers / advice. Here is a short breakdown:

    Laywer One: Take the settlement BEFORE filing bankruptcy. Spend the money prior. It doesn't matter on what as long as it's not to unsecured creditors, friends, family etc. However I do advise using the money on "life essentials" over lavish trips. And it might be a good idea to keep reciepts and a simple log on what you used it on. For instance home repairs, auto repairs etc.

    Lawyer Two: Do not take the settlement BEFORE filing. Have it settled after we get you filed and I can work out a "deal" with the (I believe) trustee. I know both of the ones in our district and they commonly allow people to keep 50% of their settlements. Mostly due to the fact that they end up with money in their pockets.


    I pushed the question with lawyer number two in regards to making sure it was long gone prior (I think he thought I was going to toss it in savings). He then kind of paused and seemed a bit "unsure". And again advised I just settled after.

    So I dropped into another forum and asked the same questions and it was pretty universal that I should settle prior and spend the money of living essentials only. And a few people mentioned paying all of the unsecured creditors a little money our of it to ward them off a bit longer (avoiding being sued). Since almost all of them have now sent "deals" of pay X now and be caught up (which isn't much). This would allow me to have more time to use the settlement and make it look like I was trying to get on track.

    Anyhow I wanted to find another resource to ask the question to gather more input. My personal injury attorney isn't familiar with this process and is waiting on me to find out what I want to do (we are about to settle).


    Thank you guys!
  • 01-16-2018, 08:13 AM
    Mr. Knowitall
    Re: Should You Settle a Personal Injury Case Before or After You File for Bankruptcy
    This is a discussion you should ultimately have with the lawyer who handles your bankruptcy case. People can advise you about your odds, but at the end of the day it's you who will be rolling the dice. If you prefer to go through the bankruptcy and end up with some of that money still in your pocket, rather than spending it first, we are not in a position to tell you that lawyer #2 is correct about what the trustee will allow.

    If you use the money to pay down your debts, that's not likely to be a huge deal for you -- because even if your creditors start fighting among themselves after you file, claiming that the payment was a preference (a payment that improperly benefits one creditor at the expense of another) they will be seeking to recover that money from the creditor that received the payment. But if you're using the money to pay your creditors before bankruptcy, there's not a whole lot of difference for you between that and having the money applied by the trustee to pay your creditors.

    If you have not filed for bankruptcy, and have not been sued by any creditors, then you're in the position of pretty much every person who has more debt than he or she can handle. You can use your money and resources to support yourself, and that's not likely to affect your bankruptcy. If your car needs new tires or is broken down, you can fix it. If your roof is leaking or your furnace is broken, you can fix it. If you choose this route, you can discuss with your bankruptcy lawyer how you intend to use the money and how long you might want to delay filing for bankruptcy after you receive the settlement.
  • 01-16-2018, 09:44 AM
    Taipans
    Re: Should You Settle a Personal Injury Case Before or After You File for Bankruptcy
    I am meeting with a third lawyer tomorrow. I feel three is enough (running short on time) and I should just go with the general consensus.

    So let me get this correct, if I ended up giving money to unsecured creditors it's not my problem when I file? The court just takes it from them? I believe I had heard that before, although obviously I didn't plan on it the idea of paying them a little to buy time ending up being brought up (by attorney). But of course as of now I am a bit stuck on what to do. And ya I understand you guy's cannot tell me what to do, however I appreciate the input.

    OK so basically in your "opinion" you feel that I could be OK settling first and using the money (reasonably)? Of course however I should get advice from an attorney on HOW to go about using it if I do so.

    Last question you mentioned "not" being sued. Considering that you never know when something will happen and as time goes on the chances rise. What happens if I do receive a settlement during the process? I imagine I might be able to settle with the particular company out of court. And then once I do file the courts will take it from them? I am thinking about the worst case scenario considering I am running out of time.

    I really appreciate your help!
  • 01-16-2018, 02:17 PM
    Mr. Knowitall
    Re: Should You Settle a Personal Injury Case Before or After You File for Bankruptcy
    Pick your lawyer, and pick a strategy with your lawyer.

    It makes little sense to pay your creditors with the money before you file unless you intend to create a preference situation. If you don't intend to create a preference and you intend to use the money to pay creditors, why not just list the pending or completed settlement on your schedules and let the trustee deal with it?

    If you are sued before you file for bankruptcy, you will want to be certain that your bankruptcy lawyer is aware of the suit such that notice of your filing can be served on the court.
  • 01-16-2018, 04:45 PM
    Taipans
    Re: Should You Settle a Personal Injury Case Before or After You File for Bankruptcy
    I do not intend to pay the creditors. I really would like to use the settlement money to fix some home and auto issues. My idea on the paying the creditors "something" was just to hold them off for a bit longer to avoid a lawsuit. Most of them are offering a really low payment to take my account out of delinquency. The only reason I am curious about that is that I was hoping to buy enough time to use the settlement to get things fixed. And of course pay for the bankruptcy itself.

    I am meeting tomorrow with the third attorney, I figure who ever she sides with might be the most accurate on what I can and cannot do. 2 out of 3 right? =)

    Anyhow I appreciate the help!
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