If you were recently involved in a car, truck, or motorcycle accident, you might be wondering whether you should file bankruptcy. That is a complicated question that involves the intersection between two legal practice areas -- auto accident law, and bankruptcy law. The answer depends on a number of factors.
Did You Cause The Car Accident?
The first question is whether you caused the car accident. If you did not cause the accident, then you might need to consider bankruptcy if you have received expensive medical treatment that you can’t afford, the other driver is uninsured or under insured, and you do not have adequate car or health insurance to cover your medical bills. In other words, in that scenario, you might be left with substantial medical bills. If that’s true, then you might want to file bankruptcy. Outstanding and significant medical bills are a common cause of bankruptcy filings.
If Your Medical Bills Are Likely To Be High, Should You File Bankruptcy Quickly?
If the other party has any bodily injury insurance coverage, or you have uninsured motorist coverage, then you don’t need to immediately rush to file bankruptcy. Instead, you should hire a car accident lawyer, and carefully follow his or her advice regarding treatment, and settlement negotiations. The reason is that many personal injury attorneys will encourage you to accept insurance policy limits, even if they do not completely cover your medical bills, to settle an auto accident case. At the same time, if at all possible, most car accident lawyers will try to negotiate your accident related medical bills with all medical providers.
If You Decide To File Bankruptcy Based On Your Medical Bills, What Will Happen To Your Income & Assets?
If your income is low, and you have little equity in any assets, then discharging medical debt by filing for Chapter 7 bankruptcy might be a good solution. However, you must financially qualify to file for Chapter 7, under something called the “means test,” which considers both your income, and expenses.
If you cannot file Chapter 7, or if you would lose assets that you want to keep by filing Chapter 7, then you still might want to consider Chapter 13. If you file under Chapter 13, then you will have to pay back a portion of your medical debt through a repayment plan. (The amount you would have to pay each creditor would be based on your income, expenses, and nonexempt assets.)
Unfortunately, if your debts are too high (including accident related medical bills), then you may not qualify for Chapter 13 (because there is a debt limit). However, assuming you qualify, after that plan is over, the remainder of the debt will be discharged.
How To Get Your Medical Bills Paid After A Car Accident
Many auto accident lawyers are able to get your bills paid after an accident, even if there is not enough insurance to cover all of your bills. Orlando car accident lawyer, Tina Willis, has a great discussion regarding numerous options for getting your medical bills paid after a car accident.
She explains a number of creative strategies that can help anyone to get their medical bills paid, even if none of the parties involved have enough auto insurance to pay those bills. These strategies can help some people avoid the need for bankruptcy.
Some of the most simple examples include:
“First, you should quickly try to buy health insurance, if at all possible. Purchasing insurance under the Affordable Care Act (“Obamacare”) is one option. . . .
Or you could try to purchase health insurance through your employer.
Or you could try negotiating directly with hospitals or other medical providers for very low cost payment plans.”By Tina Willis, Esq., of Tina Willis Law - Orlando.
However, if none of her suggested options will work in your situation, and, again, there is no insurance coverage at all, then you might need to consider bankruptcy to discharge your medical debts after a serious car accident.
Were You Partially To Blame For The Vehicle Accident?
If you were partially at fault, then Minnesota follows a legal concept called contributory negligence. That means that the amount of your damages (that you can collect from the other driver) is reduced by the percentage of your fault. Also, if you were more than 50% at fault, then you can’t recover any money from the other driver. (In that case, they can recover money from you, if they were injured.)
What If You Caused The Auto Accident?
If you caused the accident, then the most important questions to help determine whether you should file bankruptcy are:
- How seriously were you injured?
- How seriously were any occupants of your vehicle injured?
- How seriously were the occupants of the other vehicle injured?
- What is the total available insurance coverage for everyone involved?
- Most importantly (usually), how much insurance coverage do you have?
- Less important but sometimes relevant: what assets do you have?
Most Important Question: What Is The Amount Of Your Auto Insurance Bodily Injury Coverage?
Depending on the facts of your auto accident case, these issues can become very complicated. Car accident lawyers representing anyone who might have been injured during your accident are usually most concerned with the amount of your auto insurance policy, even if that amount is insufficient to cover all of the medical bills for everyone injured in the accident. The reason is that, very often, car accident lawyers will strongly encourage their clients to settle for the policy limits, rather than seek to litigate a case to try to reach your assets.
This isn’t always true. For example, let’s say you hit a motorcycle rider, caused catastrophic injuries, have extremely high available assets, and low insurance coverage. Then a motorcycle accident lawyer might try to pursue your assets, above your insurance coverage. However, in most cases, if you have decent insurance, the car accident lawyer for the injured party will often encourage their clients to accept the policy limits to settle a case, and not try to go after your personal assets.
The Very Existence Of The Bankruptcy Option May Be Enough To Save Your Income & Assets
The mere possibility that you could file bankruptcy is one of the big reasons car accident lawyers care the most about insurance policy limits, and the least about your assets or income, unless those are substantial. So you may not have to actually file bankruptcy in those types of cases -- the reality that you could file bankruptcy is enough to stop the car accident lawyer at the doorstep of your auto insurance policy limits. (There are certain types of personal injury and wrongful death cases for which any damages could not be discharged in bankruptcy -- including those involving DUI or DWI.)
Car Accident Lawyers Will Not Try To Pursue A Case Where They Aren’t Likely To Get Paid
If you have no assets, and no auto insurance coverage, most car accident lawyers will not want to waste time pursuing a lawsuit when they aren’t likely to recover any money in the end. Even if they achieved a judgment against you in court, on the theory that you could eventually get some income or assets to cover the judgment, they know that many people could file bankruptcy at any time. So, in the final analysis, if you have no money, no assets, and no car insurance coverage, car accident lawyers are not likely to pursue any case against you. The reason is because they are very unlikely to get paid at the end of the day.
When You Might Want To Consider Bankruptcy After A Car Accident
If anyone else was seriously injured in the accident, you have some bodily injury insurance coverage, and the case goes to trial, then you could be left with an excess judgment -- meaning the amount above your available insurance coverage. That’s one time when you might need to strongly consider bankruptcy. And there are complicated reasons under the bankruptcy statute why you definitely might want to file bankruptcy before the case goes to trial. For example, after a lawsuit is filed, if the case doesn’t settle at mediation (which is often part of the court case before trial), then perhaps you need to seriously consider filing bankruptcy at that time. A bankruptcy attorney can further advise whether this would be a good idea, and the appropriate timing, after they understand the unique facts of your case.
What’s The Bottom Line?
Whether you caused the accident, or not, the moral of the story is you never need to rush to file bankruptcy. However, if you want to cover all of your bases, then you definitely should consult with a Bankruptcy Attorney early in the process. Attorneys can always help you the most when they get involved earlier in the process.
But there are many things that could happen during an auto accident case, regardless of who was to blame, that could make bankruptcy unnecessary. So taking a conservative approach initially may be the best approach.
Still, having an early consultation with a bankruptcy attorney will help you understand how the facts of YOUR case are likely to unfold, and help you best prepare your strategy if you ultimately do need to file bankruptcy.
If you would like to speak with a bankruptcy lawyer about your options, please contact us today.
Our thanks to Orlando car accident lawyer Tina Willis, for her contributions to this article. Ms. Willis handles car, truck, and motorcycle accident cases. She can be reached at:
Tina Willis Law - Orlando
390 N. Orange Ave., Suite 2300G
Orlando, Florida 32801
(407) 803-2139
