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Filing Bankruptcy After a Car Accident

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In a Nutshell

This guide will introduce you to the process of filing bankruptcy in the wake of a car accident so that you can make an informed decision about your legal and financial options at this time.

Written by Attorney Kassandra Kuehl
Updated May 16, 2022

If you’ve recently been injured in a car accident, you may be struggling with making ends meet as you recover physically, mentally, and emotionally from the trauma you’ve experienced. Depending on the details of your financial situation, you may benefit from filing for Chapter 7 bankruptcy, regardless of whether you’re also filing a personal injury claim. This guide will introduce you to the process of filing bankruptcy in the wake of a car accident so that you can make an informed decision about your legal and financial options at this time.  

Filing Bankruptcy When the Car Accident Wasn’t Your Fault

Auto accidents can be devastating physically, practically, and financially. In addition to causing personal injury, they can force victims to assume a great deal of debt that they may not be in a position to pay down. From medical expenses to repairing a vehicle, making up for lost wages and addressing property damage, the aftermath of a motor vehicle accident can be frustratingly expensive.

If the car accident you were involved in was either not your fault or less than 49% your fault, a personal injury attorney can help you to file an accident claim with the goal of obtaining a personal injury settlement from the at-fault party and/or their insurance company. However, not all legitimate personal injury claims are ultimately so successful that they result in the kind of damage award amount that the victim deserves. 

For example, if you were the victim of a hit-and-run scenario, you may be unable to sue the at-fault party and/or their insurance carrier. Similarly, if the at-fault party doesn’t have car insurance coverage, there may be no way to secure compensation to cover all the bills you’ve incurred since the time of the accident. If this is the case, choosing to file bankruptcy may be the best option available to you.

Chapter 7 bankruptcy allows motor vehicle accident victims to benefit from a discharge of their eligible debts. A bankruptcy discharge could allow you to eliminate credit card bills, medical bills, and other unsecured debt in as little as 3 months’ time. This process can also stop garnishments, halt repossessions, and put an end to creditor harassment. In this way, filing a bankruptcy case could allow you to stop worrying about money and start focusing on your recovery.

Bankruptcy And a Personal Injury Case

When you submit a bankruptcy filing to the court, everything you own becomes part of your bankruptcy estate. Practically, this means that all of your possessions, intangible assets, and any property you’re entitled to become part of your bankruptcy estate on the date you file for relief. Whether you’ve already filed a personal injury case or you’re still thinking about filing an accident case, the value of that legal claim will be considered part of the estate because you technically became entitled to any settlement you may reach when the accident occurred. If you file a personal injury claim, the bankruptcy trustee assigned to your case will evaluate its potential value and determine whether to pursue the claim on behalf of your creditors. The trustee is even empowered to agree to a settlement amount.

What Happens If You Don’t Include a Personal Injury Claim in Your Bankruptcy Petition?

If you’ve already filed a personal injury claim or you intend to do so, you must disclose this information on your bankruptcy petition. If you know it exists, you have to list the claim, even if you haven’t filed a suit or even hired a personal injury lawyer yet. If you don’t report this information and later decide to pursue a personal injury case against the at-fault party, the bankruptcy court could report this turn of events, leading your personal injury lawsuit to be dismissed. 

Why? Personal injury claims are meant to compensate a victim for the monetary losses they have suffered as a result of the accident in question. If you ask the bankruptcy court to discharge debt you incurred as an injured party, the money you’re awarded from a personal injury suit isn’t directly addressing these debts. This is why you have to disclose this information on your bankruptcy petition or you’ll risk dismissal of a personal injury claim filed down the road.

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Filing Bankruptcy When the Car Accident Was Your Fault

If you were recently involved in a car accident that was determined to be your fault, know that many of the debts you may have incurred in the wake of your accident may be discharged in bankruptcy. For example, credit card balances and medical bills are eligible for discharge in a Chapter 7 case. 

However, some debts can’t be discharged in this way. For example, debt tied to drunk driving and malicious injury accidents generally can’t be discharged. If you have a lot of non-dischargeable debt, you may benefit from filing for Chapter 13 bankruptcy instead. Chapter 13 bankruptcy reorganizes all kinds of debt so that it can be paid down per the terms of an affordable 3-5 year repayment plan.


If you’ve incurred debt or lost your license in the wake of a motor vehicle accident, you may benefit from filing for bankruptcy. Filing for Chapter 13 bankruptcy allows you to restructure your debt so that paying it down is a more manageable process, whereas Chapter 7 bankruptcy eliminates eligible debts outright.

Keep in mind that if you’ve either filed a personal injury case or you may do so in the future that you’ll need to report this information on your bankruptcy petition. Failure to do so could result in the dismissal of a related personal injury case filed down the road. If you’re entitled to a settlement of any kind, the trustee assigned to your case will be empowered to approve the settlement and attorneys’ fees for your personal injury counsel.

If you’re interested in filing for bankruptcy, consider speaking with an experienced bankruptcy attorney in your area. Most bankruptcy law firms offer free consultations to prospective clients. Asking questions won’t obligate you to file for bankruptcy but doing so will allow you to make a more informed decision about your legal options at this time.

Written By:

Attorney Kassandra Kuehl


Kassandra is a writer and attorney with a passion for consumer financial education. Outside of consumer law, she is focused on pro bono work in the fields of International Human Rights Law, Constitutional and Human Rights Law, Gender and the Law. Kassandra graduated from Universi... read more about Attorney Kassandra Kuehl

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    Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can’t access their basic rights when they can’t afford to pay for help. Combining direct services and advocacy, we’re fighting this injustice.

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