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Personal injury claim must be listed in bankruptcy as an asset

The general rule in a federal bankruptcy court in Florida and elsewhere is that the filer must list any personal injury claims as assets of the bankruptcy estate. The theory is that if there is money to collect from the bankrupt's injury claim, the bankruptcy trustee must take that money and pay creditors to the extent possible. The rule, however, runs into grey areas, and it may be difficult to determine in all instances whether the filer intentionally tried to hide an injury claim from the bankruptcy court.

That rule was recently tested in another state by a three-judge appellate court panel. The consumer filer got in an accident, suffered a knee injury in April 2013 and had knee surgery three months later. Shortly thereafter, he and his wife filed a Chapter 7 case and stated in those papers that he had no contingent claims.

However, the existence of an injury caused by an insured third party indicated at least a potential claim. The man did amend his papers in Oct. 2013 and stated that he had a "possible" pending claim of $15,000. In Jan. 2014, the bankruptcy court discharged the case, but by that time he had an active injury claim against the tortfeasor.

He brought a personal injury suit against the tortfeasor in June 2014. In the state court action, the defendant asserted that the debtor hid the claim and deceived the bankruptcy court. The trial court agreed and dismissed the case. The appellate court panel, however, reversed that decision, holding that the filer did amend and thus notified the bankruptcy court of the claim.

Furthermore, he retained a substantial interest in the case because there was an exemption amount that he could claim under bankruptcy laws. The case really concerned federal bankruptcy laws more than state law, and as such, the decision would likely go in a similar direction if litigated in Florida. It illustrates the need for accuracy and detail in filing the bankruptcy petition and schedules so that there are no omissions to come back to haunt the debtor(s) after discharge.

Source: cookcountyrecord.com, "Man did not sidestep bankruptcy court by playing coy, waiting to file personal injury suit: Appeal panel", Dan Churney, Feb. 24, 2017

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