Let’s say you were in a car accident and have an attorney pursuing a personal injury claim on your behalf. Since you were out of work, the bills stacked up and you need the PI money to pay the bills. How does a personal injury claim effect a potential bankruptcy?

First off, your bankruptcy attorney will want to assess your personal injury claim. We usually do this by calling your personal injury attorney to get a ballpark number of potential settlements. The bankruptcy code allows you unlimited compensatory damages, but cap the amount of pain and suffering award you can protect from creditors.

Once your bankruptcy attorney gets that information, he can decide if it is small enough that you can still file and keep whatever settlement you receive. If the potential settlement is large, you will need to decide if you want to file at all, since some of the settlement will need to go to pay creditors. Or if settlement is imminent, whether to wait until you get the money and then using exemption planning to protect it.