There are times when personal injury law and bankruptcy law intersect. The recent case of Morton v. Scholtzhauer, before the Maryland Court of Appeals (the highest court in that state) was one of those.
In a personal, Chapter 7 bankruptcy, an individual is able to discharge most personal debts that they are unable to pay. His or her assets may be divvied up to satisfy existing creditors to whatever extent possible. In the event that individual is the defendant in a personal injury lawsuit, those debts may be included (though generally not if they arise from one’s intoxicated operation of a motor vehicle). In the event the individual is a personal injury lawsuit plaintiff, courts typically allow that individual to retain their standing in the litigation (as opposed to being forced to turn it over to the bankruptcy trustee) and keep whatever compensation they receive from that proceeding. However, injury victims generally have to ask the bankruptcy court expressly for permission in this. Failure to do so could result in a situation like what happened in Morton.
The court noted part of the price debtors must pay to have their debts more or less discharged and make a fresh start is to detail all their property interests so the bankruptcy trustee can dole out portions of it to creditors. Among these property interests that must be listed are personal injury claims of the person in debt. Continue reading