Treatment of Auto Accident That Occurred After the Filing of Bankruptcy

Car Accident After Filing BankruptcyIf a Debtor files Bankruptcy and following the filing of the Bankruptcy, the Debtor is in an auto accident, then how such accident is treated by the bankruptcy trustee depends heavily upon whether the Debtor filed a Chapter 7 or a Chapter 13 Bankruptcy.

Bankruptcy Code Section 541(a) states that the commencement or filing of the bankruptcy case creates an estate. This is referred to as the bankruptcy estate. The bankruptcy estate, according to Bankruptcy Code Section 541(a)(1) consists of all legal and equitable interests of the debtor in property as of the commencement of the case.

If the Debtor filed a Chapter 7 bankruptcy, then the claim for injuries that the Debtor may personally have incurred in the automobile accident that occurred after the filing or commencement of the bankruptcy is not part of the bankruptcy estate, and therefore is not subject to administration by the Bankruptcy Trustee.

However, the damages to the automobile and the automobile itself may be subject to liquidation by the Bankruptcy Trustee. If the automobile was not claimed as exempt in the bankruptcy petition, or the automobile was claimed as Exempt, but the Chapter 7 Bankruptcy Trustee is able to successfully maintain an objection to the Debtor’s claim of exemption by filing an appropriate Objection to such exemption within 30 days after the first completed meeting of creditors, or 341 hearing, then such asset, and the resulting claim for damages to the automobile resulting from the automobile accident, may be subject to administration and liquidation by the Chapter 7 bankruptcy trustee.

If the automobile accident occurs after the filing of a Chapter 13 Bankruptcy, the result differs dramatically. Bankruptcy Code Section 1306, which governs Bankruptcy filings under Chapter 13, states under Section 1306(a)(1) that property of the estate includes, in addition to the property specified under Bankruptcy Code Section 541, all property of the kind in such section that the debtor acquires after the commencement of the case, but before the case is closed, dismissed under Chapter 7, 11, 12 of this title. Therefore, an automobile accident that occurred after the filing of the Chapter 13 would generally be part of the bankruptcy estate, and the monies received in such accident could be subject to seizure by the Chapter 13 bankruptcy trustee, and such monies distributed to creditors pursuant to the Chapter 13 plan.

Various States provide Exemptions for monies received in a personal injury action, such a lawsuit arising from an automobile accident. However, Florida does not provide such an Exemption.

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