What To Do When A Defendant Declares Bankruptcy On Your Auto Accident Judgment
Filing a lawsuit and securing a monetary judgment against someone who caused an auto accident is only the first step toward collecting compensation for the losses you sustained. Actually getting the money owed is the second and most challenging step in the process. If the defendant can't afford to pay you, that person may file bankruptcy in an attempt to eliminate the debt. Here's what you can do to prevent the judgment from being wiped out by a bankruptcy discharge.
Avoid Sanctions By Obeying Bankruptcy Rules
As far as the court is concerned, you are a creditor. As such, you must obey federal bankruptcy rules regulating creditor behavior during bankruptcy proceedings. In particular, you must cease any and all attempts to collect the debt until the trustee says it is okay to continue or the case has been resolved. Among other things, you
- Cannot call or otherwise contact the person to discuss the debt
- Cannot assign the debt to a collection agency
- Cannot put liens on any of the person's property
- Cannot seize any of the person's property
- Must stop wage garnishments and release holds on the person's bank accounts
If you have begun collection activities against the debtor, it's important work with your attorney to make the changes required by the bankruptcy court to stay within the law. Violating the regulations could result in court sanctions that may affect your ability to collect on the judgment.
Determine If Your Debt Is Dischargeable
Just because the defendant has filed bankruptcy doesn't mean a discharge of the judgment is a foregone conclusion. Certain types of judgments are non-dischargeable:
- Judgments resulting from accidents caused by intoxicated persons (e.g. wrongful death suit stemming from a DUI accident)
- Judgments from accidents caused willfully or maliciously (e.g. the person hit you with the vehicle on purpose)
- Judgments resulting from fraudulent actions (e.g. the person staged the accident in an attempt to commit insurance fraud)
If the debt owed fits any of these categories, it will survive the bankruptcy proceedings and you can continue your collection efforts after the bankruptcy case has concluded.
Objecting To The Discharge
Even if your judgment is dischargeable, you can still object to the discharging of your debt or all the debts listed in the petition for other reasons. If you can prove the debtor committed bankruptcy fraud, for instance, then you may be able to get the person's case dismissed altogether. Examples of bankruptcy fraud include:
- Knowingly providing false information on the petition and schedules (e.g. lying about income or assets)
- Attempting to hide assets (e.g. transferring the title of a vehicle into another person's name)
- Lying to the court
- Filing a false tax return
You can also object to the discharge of debts if the person successfully obtained a bankruptcy discharge within the previous 2 to 8 years. Bankruptcy law only allows debtors to obtain a chapter 7 bankruptcy discharge every 8 years and a chapter 13 every 2 years. If public records show that not enough time has passed between the debtor's filings, then you can probably get the case dismissed based on that fact.
Filing An Objection
You must first respond to the bankruptcy notice with proof that you are owed money by the debtor. Afterwards, you'll need to submit an objection to the bankruptcy in writing. You must list the reasons why the debt should not be discharged by the court.
For example, you would notify the court that the judgment is non-dischargeable because the debtor caused the accident while under the influence of drugs or alcohol. You'll need to submit any evidence that supports your claim such as the police report, court transcripts and award papers.
The court will schedule a trial to consider your request and will typically render a decision at the end of that day's proceedings.
If you're not able to prevent the judge from discharging the debt, then you may be able to negotiate a settlement with the debtor or trustee before the bankruptcy case is concluded. To increase your chances of prevailing in court or for assistance with working with the debtor to settle the judgment, contact an experienced attorney. Click here for info about the services a car accident attorney can provide for you.