Can The Person Who Injured Me Declare Bankruptcy?

What Happens If The Person Who Injured Me Files Bankruptcy?

Our lawyers have had several cases where the business we are suing files for bankruptcy. What happens to the case? When a person or business declares bankruptcy, all pending claims and lawsuits against them are automatically stopped. However, in an accident injury case, if the person or business being sued had insurance for the claim, such as automobile insurance or defective product insurance, the claim can continue (the “stay” can be lifted.) To do this, the injured person has to limit his or her claim to the amount of available insurance coverage. Our accident injury attorneys have had to deal with this situation a number of times.

Personal Injury Settlement Bankrupt
Personal Injury Settlement Bankrupt

If there is not enough insurance, or the person causing the injury did not have insurance or the business was self insured, the accident claim will unfortunately often be severely reduced or discharged in bankruptcy.


Our Minnesota personal injury lawyers have encountered situations where a company or business has injured our client and then files for bankruptcy. In some case, the company is already in the process of bankruptcy before the accident, but still operating, and our client is injured. Often, there will be a claims process where the bankruptcy trustee will determine a value for the claim, and then that amount will be listed as an unsecured claim that will receive the same proportionate payment as other unsecured claims. (This is usually a very small payout on the claim).

Unfortunately, with business bankruptcies where it is a big business (for example an injury lawyer in our office recently had this happen with a restaurant chain called Old Country Buffet), the bankruptcy administrators usually eat up most of the money by working on the bankruptcy for several years, leaving little in the end for the injured claimants.

When it is an individual person who causes the accident and declares bankruptcy after injuring someone, the process is faster and is usually just one claim directed to a single insurance policy. Unfortunately, with an individual bankruptcy, our accident injury lawyers have found that if there is no insurance, the injured person usually ends up with no compensation.


One exception to these discharge rules is that the Bankruptcy Code bars the discharge of any eventual judgment that involves the commission of “willful and malicious” act or is because of drunk driving under 11 U.S.C. § 523(a)(6).  But the injured person has the burden of proof in bankruptcy court that the offender’s conduct satisfied the statutory requirement.

Another exception is that if restitution is ordered, it is entered as a civil judgment against the defendant and in the victim’s favor and is not dischargable in bankruptcy. MS § 611A.04, subd. 3.

If you have been injured in an accident, please call us and speak with an experienced personal injury lawyer about your potential case.  An attorney will provide you with a free consultation, and we never charge anything unless you obtain a recovery on your case. If you have been injured by a business or company that is in bankruptcy, we can still sue them and proceed against their insurance or other assets. Pam Rochlin and David Rochlin are lawyers with more than 25 years’ experience successfully helping hundreds of people injured in accidents throughout Minnesota. We will answer your questions and make sure you get fair compensation for your injuries.