Implications Of A Defendant’s Bankruptcy On A Personal Injury Judgment


Victims of serious accidents can be incapacitated at hospitals for weeks or even months. Even with medical insurance, hospital bills, prescription medications, surgeries, and rehabilitation costs can quickly add up. This often makes life extraordinarily burdensome for victims. Unfortunately, winning a large personal injury verdict does not always guarantee that a victim will collect a payout from the liable party. In some cases, a defendant may lack adequate financial resources to pay the judgment and file for protection under bankruptcy.

What Happens If The Defendant Files For Bankruptcy?

Defendants, such as municipalities and large corporations, tend to have deep enough pockets to satisfy large judgments and settlements. However, some defendants who cannot afford to pay millions of dollars may decide to file for bankruptcy. While most personal injury lawsuits are tried under state law, bankruptcy is a federal matter.

Generally, a Chapter 7 bankruptcy discharges a defendant’s legal obligations to pay any judgment based on negligence. If the plaintiff is lucky, they may be able to collect any remaining money after all of the defendant’s secured creditors are paid off.  On the other hand, personal injury judgments arising from a defendant’s willful or intentional harm to the victim are protected from being discharged in bankruptcy. Additionally, bankruptcy law forbids courts from discharging obligations related to injuries and deaths caused by driving under the influence of drugs or alcohol.

The Defendant’s Insurance Company

It is well established that a bankruptcy does not prevent the plaintiff from seeking a judgment against a bankrupt defendant for the specific purpose of pursuing payment from their insurance company. Bankruptcy does not relieve an insurance company of its obligations to pay compensation for injuries and other damages covered under an existing policy. Fortunately for most victims, if their case has won a judgment in court or reached a settlement, chances are that the defendant has some form of liability insurance to cover the underlying accident.

In the case of a car accident, where the defendant does not have adequate insurance to cover the damages, the victim could file a claim through their uninsured or underinsured motorist coverage. These types of claims involve a victim’s own insurance company compensating them.

Call Our Aggressive, Tenacious, And Hardworking Personal Injury Attorneys Today!

For over two decades, Jed Dietrich, Esq. has aggressively litigated to obtain over $175 million in verdicts and settlements for seriously injured victims in Buffalo, New York. The Dietrich Law Firm P.C.’s team of attorneys has a wealth of experience helping clients to secure compensation from every possible source, such as defendants’ insurance policies, negotiating massive settlements, collecting significant judgments, and pursuing the client’s own uninsured or underinsured motorist coverages. When you retain our battle-tested lawyers, the last thing you need to worry about is collecting the compensation you are owed. Should you have any questions or need assistance after suffering a tragic accident, we invite you to contact us for a complimentary, no-obligation case evaluation. Call the Dietrich Law Firm P.C.’s elite team today at 716-839-3939.

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