Bankruptcy Court Confiscates Personal Injury Settlement

A federal judge recently ruled that people in bankruptcy cannot receive any personal injury settlement money until their creditors are paid in full.

Three years after his Chapter 13 creditor repayment plan was confirmed, Clyde Wilson sustained serious injuries in a car crash and received a $197,000 settlement. In determining that the money belonged to the bankruptcy trustee for the benefit of the creditors and not Mr. Wilson personally, U.S. Bankruptcy Judge John Kolwe, in the Western District of Louisiana, applied the “estate-replenishment test” and ordered Mr. Wilson to turn over the money.

Judge Kolwe hinted that if future debtors could prove that their settlement funds were entirely used for expenses, or necessary for current living expenses, they may be able to keep those funds.

Settling Negligence Cases

Around 97 percent of negligence cases are resolved by an agreement between the parties and not by trial. A few settle with a few months of the crash and a few others are not settled until the jury retires to consider its verdict, so the vast majority of personal injury settlements occur somewhere in between these two times.

The first step is to ascertain the case’s settlement value, and this process often involves more art than science. In addition to tangible items, like the dollar amount of medical expenses and lost wages, an attorney must equally weight intangible factors, such as the habits of prior juries in that parish and the severity of the victim’s injuries. The settlement value cannot be properly determined until the victim has returned to work and medical treatment is at least substantially finished.

Next, an attorney sends a demand letter to the insurance company, and this act starts negotiations between the two sides. The insurance company’s first offer is almost always a “low ball” offer, because the insurance company knows that the victim is probably under financial duress and will be tempted to take almost any offer to get immediate cash.

If informal negotiations break down, most judges refer the parties to mediation, during which a neutral third party tries to facilitate a personal injury settlement. Mediation is surprisingly effective, and most parties are either able to completely resolve the case or at least narrow the issues for trial. The handful of cases that do not settle through informal negotiation or formal mediation are tried before either a judge or jury.

In personal injury settlement negotiations, an attorney is committed to maximum recovery for victims. For a free consultation with an assertive personal injury lawyer in Lake Charles, contact Hoffoss Devall today, because you have a limited amount of time to act.