In Kocher v. Campbell, 282 Va. 113 (2011), the Supreme Court of Virginia
made it clear that it is imperative for the Virginia personal injury lawyer
know if a client has filed or is going to file for bankruptcy. Chapters
13 and 7 bankruptcies are treated differently with respect to personal
injury claims, but for the sake of this post we will only be referring
to Chapter 7.
First, it is essential that a plaintiff list her personal injury action
in the bankruptcy proceedings
because it is an asset. This is likely true even if the plaintiff has not yet filed suit.
- Second, it is imperative the plaintiff list the action at its actual value
(e.g., not "$0.00 or $1.00). The reason for this is because when
the claim is listed in the bankruptcy proceeding, and a value is assigned
to it, the personal injury plaintiff has made a declaration in court proceedings
about the value of her case. The personal injury plaintiff then runs the
very real risk of later being estopped from trying to obtain a large verdict
because she has already averred the case is worth almost nothing.
- Third, the personal injury action must then be exempted from the bankruptcy
proceedings. Unless the personal injury action is exempted from the bankruptcy
proceedings, the action belongs to the trustee, and the trustee is the
proper party plaintiff—that is, the action is no longer the plaintiff's
to prosecute. By exempting the action, the action returns to the plaintiff
and the plaintiff remains the proper party. A failure to coordinate a
plaintiff's bankruptcy proceedings with her personal injury claim
could result in a dismissal of her personal injury case due to the statute
of limitations running, or some other legal mechanism.
It is imperative that a potential client or current client promptly report
any past, pending or planned bankruptcy proceedings. This is only a very cursory overview of the importance of the relationship
between bankruptcy and a personal injury claim and it is important to
seek sound legal advice to be sure the personal injury action is not compromised.