Car Accidents and Bankruptcy

Expenses can add up fast after a car crash. Medical bills, repair costs, and a sudden drop in income can quickly deplete bank accounts — especially for those too injured to work and earn a living. In extreme cases, post-accident debt can become so overwhelming that a bankruptcy filing might be the only way out.

If you feel overwhelmed by medical bills and insurance disputes after an injury, the legal team at Salvi, Schostok & Pritchard P.C. can help. We understand the challenges posed by debts arising from a car crash and can help you seek the compensation needed to rebuild your finances and secure your future. Contact us today to speak with an experienced car crash attorney. We will discuss your personal injury claim and how it could be affected by a bankruptcy case in a free consultation.

Why It is Important to Work with an Experienced Personal Injury Attorney After a Car Crash

If you are the victim of someone else’s negligence, you should not have to pay for their mistakes. Unfortunately, accessing insurance coverage can be challenging after a collision, whether you are filing a claim against the at-fault party’s liability policy or seeking first-party benefits under your own optional add-ons. Dealing with creditors hounding you over your debts is bad enough, but managing these stressors while recovering from an injury is a heavy burden to bear. Fortunately, you don’t have to carry that weight alone.

An experienced personal injury attorney can step in to protect your rights, seek fair compensation, and explore solutions to your debt burden. The advantages of working with a skilled personal injury attorney after a car crash include:

• Case management – Your lawyer will handle all the legal legwork for you, freeing you from constant phone calls with the insurance company and debt collectors. While you focus on healing, your lawyer will aggressively pursue a settlement that pays you quickly and fairly.
• Lien negotiation – An experienced attorney can negotiate medical liens with healthcare providers so you can access the treatment you need at a lesser cost before the case settles.
• Advice you can trust – An experienced personal injury attorney has helped many clients in positions similar to yours. They know how hard times can be and will advise on ways to make ends meet.

How Car Accidents Can Cause Bankruptcy

Car crashes can lead to bankruptcy in several ways:

• High cost of medical treatment – Emergency services, surgeries, hospitalizations, prescriptions, and rehabilitation can easily lead to hundreds of thousands of dollars in medical bills. These healthcare expenses can strain anyone’s finances, especially those without adequate insurance coverage.
• Lost wages – Missing work due to car crash injuries can cause a sudden drop in household income. Ongoing bills and expenses do not wait for you to heal.
• Unclear prognoses – Recovery times for serious injuries may extend far beyond initial expectations, resulting in permanent or long-term disabilities. The full financial impact of the injuries may not become apparent until months after the crash. Meanwhile, ongoing care costs and cumulative losses continue to climb.
• Insufficient health and auto insurance – Your insurance policies might not fully cover your medical expenses, and your deductibles and policy limits can add to your debt. The gap between insurance coverage and the actual costs of a collision can lead to undue financial hardships.
• Auto repair or replacement costs – Fixing or replacing a badly damaged vehicle might be unaffordable, and most of us rely on our cars to get around. Losing a vehicle adds another layer of difficulty after a crash, potentially requiring expensive rentals and an inability to pay off existing car loans.

Each of these factors alone can strain finances, but together, they may push a car crash victim toward bankruptcy as a viable solution to manage overwhelming debt.

What Happens If I File for Bankruptcy After a Car Accident?

Filing for bankruptcy after a car crash can complicate your insurance claim or lawsuit. Here’s how:

• Proceeds from insurance or a personal injury claim might be part of the bankruptcy estate, even if you have not yet recovered them. An experienced attorney can determine if federal bankruptcy exemptions may bypass certain assets.
• Illinois offers specific exemptions that can protect certain assets from creditors. Under these laws, you may be entitled to keep up to $15,000 of a personal injury award.
• What happens to your non-exempt property depends on which chapter of bankruptcy you file. If you filed for Chapter 7 bankruptcy, the court will sell any non-exempt property to pay off your creditors. You may need to surrender your vehicle if it is leased or has a burdensome loan attached to it. If you filed for Chapter 13 bankruptcy, you can keep more property, but you must submit to the terms of a payment plan managed by a bankruptcy trustee.

What if the At-Fault Party Files for Bankruptcy?

When the party at fault in a car crash files for bankruptcy, it can affect the compensation process in the following ways:

• Bankruptcy triggers an automatic stay, temporarily preventing creditors from collecting debts. However, proceedings may sometimes continue with permission from the bankruptcy court. This stay can protect the debtor during the bankruptcy process but does not necessarily eliminate their legal obligations from a motor vehicle collision.
• If the at-fault driver had insurance at the time of the crash, this insurance should still cover the cost of your claim up to its policy limits. You may still need the approval of the bankruptcy court.
• It is still possible to recover a judgment if the debts arising from a car accident fall into the non-dischargeable category under Section 523(a)(6) of the Bankruptcy Code. This section outlines that debts from willful and malicious injuries to another person or property are not dischargeable, potentially allowing victims to bypass the bankruptcy discharge. This means that if the injury caused by the debtor was intentional, the victim could still pursue compensation.
• Even if the primary at-fault party files for bankruptcy, it may be possible to identify and claim against other parties who contributed to the crash. This can include co-defendants or third parties who may have had a role in the circumstances leading to the accident, such as another driver, a company responsible for vehicle maintenance, or even a public entity in charge of road safety.

Contact a Chicago Car Crash Attorney Today for Your Free Consultation

Collisions cause more than just injury and pain. They might even lead to bankruptcy. Before taking drastic action that has long-term consequences for your financial well-being, contact a Chicago car crash attorney at Salvi, Schostok & Pritchard P.C. for a free consultation. Our law firm is committed to protecting victims’ rights, having recovered over $2.5 billion to date in personal injury claims. We can discuss strategies to ease your financial burdens and get your life back on track. Call or contact us today.