Personal Injury Claims in Bankruptcy

Bankruptcy Petition

Personal Injury Claims are not exempt in Bankruptcy

Is My Personal Injury Claim Protected in Bankruptcy?

Answer:   No, personal injury claims are not protected in Missouri Bankruptcy.

Often, I speak with clients who have on-going cases involving an automobile accident.  Many times, it’s the cost associated with such accidents that in part, leads them to the financial struggles they are having.  Debtors and attorneys a like should pay close attention to a new case here in Missouri that specifically addresses how injury claims are treated when the injured person if filing a bankruptcy.

The Ruling Case:

The 8th Circuit issued a decision stating that existing personal injury claims are not exempt in Bankruptcy.  The case cite is Abdul-Rahim v. LaBarge (In re Abdul-Rahim), Case No. 12-3448 (8th Cir. 2013).

In this case, the debtor’s exempted a personal injury claim that had resulted from a car accident.  The trustee, objected to the exemption arguing it was improper.  The court agreed, finding that no specific Missouri statute specifies that an unliquidated claim such as this can be exempted from the bankruptcy estate.

Missouri Bankruptcy Exempt Property

Missouri debtors “shall be permitted to exempt from property of the [bankruptcy] estate any property that is exempt from attachment and execution under the law of the state of Missouri.” Section 513.427 RSMo.

A separate Missouri statute, Section 513.430 RSMo, lists the kinds of property that are exempt from attachment and accordingly may be exempted from the bankruptcy estate. The proceeds of personal injury or tort claims, unliquidated or otherwise, are not listed in Section 513.430, nor are they listed as exempt in any other Missouri or federal statute.

So what does this mean?  If you are filing for bankruptcy relief in Missouri, you’ll want to speak with a qualified bankruptcy attorney about your case if you are involved in a personal injury claim.  This is true regardless of the status of that claim. Even if the PI case is not yet filed, it is still an asset that is subject to the debtor’s estate and you’ll want to protect that asset to the extent possible.  Always disclose such claims to your attorney so he or she can take appropriate steps to protect it.

Leave a Reply 0 comments

Leave a Reply: