The Pearson Law Firm, P.S.
Do I have to disclose my personal injury claim to my bankruptcy attorney?
The short answer is yes, you do. Personal injury claims are going to be considered an asset of your estate (that is, something with financial value that could be used to pay off your creditors). Keeping your injury claim a secret from your bankruptcy is a ticking time bomb; sooner or later it will be discovered, and the failure to disclose it can ruin both your bankruptcy and your personal injury claim.
What is equally important to understand, is that disclosing the claim doesn’t mean your recovery is going straight to your creditors.
When your claim is disclosed as an asset, the trustee assigned to your bankruptcy will make contact with your personal injury attorney (if you have one – if you don’t, the trustee will likely hire one to deal with the claim). The trustee will likely ask that the same attorney continue to work on the case, with the understanding that your bankruptcy estate now owns the claim. Once the case is resolved, your personal injury attorney will work with the trustee to determine what portion of the recovery is exempt-able (meaning, the portion that you get to keep).
In my practice, most moderate personal injury claims are ultimately returned by the trustee to the client through the exemption. Ultimately, this is the best choice, because the client loses all incentive to participate in the personal injury claim when they personally won’t be benefitting.
The bottom line is, don’t hesitate to speak to your personal injury attorney if you are contemplating or beginning the bankruptcy process.