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If Bankrupt Will My Compensation Pay My Creditors?

What do you do when faced with bankruptcy during a claim? We answer your questions in our guide, and if you need help, chat with a Lawyer, it's free!

HomeFAQ > If I become Bankrupt will my compensation go to pay my creditors?

If I become Bankrupt will my compensation go to pay my creditors?

No it will not, compensation that you receive from your personal injury claim does not form part of your estate in bankruptcy.

Therefore, the Trustee in Bankruptcy is not able to use any compensation or damages payments relating to your personal injury claim, to meet debts owing under your Bankruptcy.

And this applies, whether you are declared bankrupt before, or after you receive your compensation payment for your personal injury compensation or damages claim.

 

Injuries can have a devastating impact on your income, talk to us about your claim

Unfortunately when a person suffers injury and they are unable to return to work or to running their business, this can have a devastating impact on their financial circumstances. 

We all have financial commitments to meet and when you are employed and earning income, then we all tend to incur greater financial commitments because we are able to afford them.

However, when you are suddenly injured and that weekly income payment stops, or is significantly reduced, and you can no longer meet your weekly credit card, mortgage, or car or personal loan payments, then this can be a real issue.

It can often cause serious and terrible anxiety and stress for the injured party, their partner and family.

 

We can help you identify and access revenue streams during your compensation claim

We at The Personal Injury Lawyers have seen this problem over and over again in our more than 30 years experience running personal injury claims.

What we do is tell our clients up front that they should not stress over this issue as there are options available to them and which we can help them identify and access.

  • Including income disability insurances

  • Advances on damages from the claim insurer

  • Credit and loan insurances

As well as litigation loans where you are able to obtain a lump sum payment from a litigation lender, that does not have to be paid back until the end of your personal injury claim, and only if you achieve compensation.

 

What if debts become so unreasonable that Bankruptcy becomes the best option for an injury victim?

There are circumstances where the debts that accrue in not being able to meet substantial loan payments or credit card debts, become so unreasonable in the circumstances of increasing and accruing interest, that Bankruptcy becomes the best option for an injury victim.

Although no one wishes to be in the position where they have to declare bankruptcy, there are some circumstances where it is just not able to be avoided.

It may be through no fault of the injured person who has only been placed in such a position because of someone else's negligence.

 

personal injury claim compensation and damages cannot be used to meet any debts of the bankruptcy estate.

The compensation payment remains separate from the bankruptcy and cannot be accessed by the Trustee in Bankruptcy.  

Similarly any assets purchased with compensation received for personal injury are also protected from the bankruptcy and cannot be used to pay creditors, whether purchased before or after bankruptcy is declared.

 Frequently Asked Questions

Looking for more? View all our Frequently Asked Questions. Remember if you have a question it's free and you under no obligation to chat with our Lawyers online, by phone or email. Better to answer that question and know than it go unanswered. Contact us today.

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