Barriers to Collecting a Personal Injury Judgment
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What Happens If I Win My Personal Injury Claim?
Assuming you win at trial, you will get a court document stating that the defendant owes you a certain amount of money. The court itself does not collect the money. You have to collect the money yourself. If the defendant does pay up, the defendant will pay one sum of money and the case will end. This article deals with a personal injury plaintiff as a defendant’s creditor.
What If the Defendant Is a Corporation?
Most corporations will either appeal the decision or pay the judgment. In some cases though, the corporation might not have a lot of money available. If that happens, you might have to pierce the corporate veil. This means that you have to go after the corporate owners directly. However, this can only happen if the corporate owner fails to maintain the distinction between the owner and the corporation.
What If the Defendant Is Getting Divorced?
This depends on the state. States which keep marital property separate only allow creditors to access property or money which the defendant managed. If the defendant’s spouse/former spouse managed a property without the defendant, you can’t access the asset.
If the state is community property, you can access the property and the money of both spouses. Some states require that you collect everything you can from the defendant before going after the spouse.
Finally, some community property states split the debt evenly between both spouses. You might have to wait for the divorce to end before discovering which spouse you can collect from.
What If the Defendant Is a Beneficiary of a Trust?
One of the largest sources of money a defendant could have is a trust. The purpose of most trusts is for a party to hold the trust funds until the defendant is ready to receive it. As a result, accessing the trust can be difficult if the defendant does not already have access to the trust him or herself.
There are a few ways of accessing a trust, depending on the type of trust involved. Some trusts wait until the trust creator is deceased, then releases the money to the defendant. Obviously you can’t wait forever, but if you have time, waiting might be an option. Other trusts allow creditors to attach a lien to the trust itself. If the trustee distributes money, creditors will be paid first.
Some states allow creditors to access the trust depending on certain circumstances. In some states, you could access the trust if the defendant committed a felony, such as a hit and run. Some states allow creditors to collect trust funds if the funds exceed the purpose of the trust, such as payment for the defendant’s college tuition.
Finally, most states will allow creditors to access the trust if the purpose of the trust was fraudulent. If the defendant created the trust to avoid having to pay you, the trust itself might be invalid.
What If the Defendant Declares Bankruptcy?
If the defendant files for bankruptcy, the defendant must list you, the personal injury creditor, on his/her/it’s bankruptcy documents. If the defendant fails to do so, your claim will be non-dischargeable.
If the defendant does properly list you as a creditor, your options will differ based on the type of bankruptcy filed. In a Chapter 7 bankruptcy, your claim will most likely be discharged. The only exceptions are if the injury was malicious and/or if the case involved a DUI.
In a Chapter 13 case, you can try to negotiate with the defendant for payment. The chances of success are low given that your claim is still subject to discharge, but that discharge might not happen for another three to five years.
In a Chapter 11 case, the defendant is most likely a corporation. Your claim will be part of a larger class of creditors and your class will have a vote in the bankruptcy proceedings. Your debt won’t be discharged, but depending on how the corporation restructures, you might not be able to collect your claim for a long time, if at all.
Do I Need an Attorney?
There are many confusing legal procedures that a lawyer can make you aware of to limit your own liability, and increase your chances of collecting the debt. If you choose to go to court, hiring a lawyer can be vital to getting a judgment against the debtor.
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Last Modified: 07-29-2015 06:20 PM PDT
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