Recently, we discussed protecting personal injury settlements in bankruptcy. Those who receive money in a civil action list it as an asset, something one wants to protect in bankruptcy via an exemption.
Today, we’re discussing the opposite situation: personal injury judgments in New York bankruptcy. If you have a judgment against you, the bankruptcy code considers the opposing party one of your creditors, whom you must list on your bankruptcy petition. Although, you may be asking, “Is a personal injury creditor any different from other creditors?” and, “Is a personal injury judgment dischargeable in bankruptcy?” For the most part the answer is “No.” Here’re a few details:
First, if you committed an intentional tort, i.e. a deliberate civil wrong against another person or a person’s property, the judgment is not dischargeable in bankruptcy. So someone who steals a car and destroys it cannot discharge a civil judgment against him or her in bankruptcy. By contrast, for acts of negligence, such as causing a car accident, the judgment is dischargeable. However, if someone is intoxicated while committing an act of negligence, the debt is not dischargeable. This rule is meant primarily to prevent drunk drivers from escaping their liabilities to others.
Second, the bankruptcy code requires the personal injury creditor to initiate an “adversary proceeding” against the petitioner. The creditor must initiate the adversary proceeding within 60 days of the petitioner’s filing or else the court will consider the debt dischargeable. This is good for petitioners because it places the onus of defending the claim on the creditor. People filing bankruptcy must list the judgment on their petitions.
Very few people have civil judgments against them, so this issue does not come up all that often in consumer bankruptcies. It’s more common for businesses to have judgments against them. Additionally, few people actually commit intentional torts. But those who do will need an experienced New York bankruptcy lawyer to handle their cases and guide them to the discharge they deserve.