What Happens When a Negligent Driver Files for Bankruptcy in Georgia?
In a recent case, the Georgia Court of Appeals addressed a scenario where the defendant in a wrongful death lawsuit filed for bankruptcy the same day the jury returned a verdict against it. The case, Cedar Valley Cypress, LLC v. Guthrie, involved a man who died while under the care of a nursing home. The jury ruled in favor of the victim’s estate and awarded compensatory damages. A separate phase to determine an award of punitive damages was subsequently stayed (delayed) by the defendant’s bankruptcy filing.
Consequently, both the trial court and the Court of Appeals said it “lacked jurisdiction” to conduct any further proceedings in the wrongful death case until the bankruptcy stay is lifted.
The Automatic Stay and Personal Injury Claims
So what exactly is a bankruptcy stay and how can it affect a Georgia personal injury case? In simple terms, when a person or legal entity (like a corporation) files for bankruptcy protection, the federal bankruptcy court automatically issues an order suspending any pending legal proceedings or debt collection activities against that debtor. This automatic stay remains in effect until it is lifted by the federal bankruptcy court or the bankruptcy case ends.
The case above involved a Chapter 11 bankruptcy, which is commonly used by businesses to reorganize their debts under a court-approved plan. When it comes to individual debtors, however, most bankruptcies fall under either Chapter 7 or Chapter 13 of the Bankruptcy Code. A Chapter 7 filing is often the most consequential for a personal injury victim. That is because the goal of Chapter 7 is to liquidate the debtor’s assets, if any, and then issue a full “discharge” of any remaining debts. A discharge is a court order absolving the debtor of any future legal obligation to pay that debt.
Such debts often include personal injury judgments. If a plaintiff obtains a judgment and the defendant subsequently files for Chapter 7 bankruptcy, the bankruptcy court is likely to discharge the debt if the defendant has insufficient assets to pay. There are some exceptions. Notably, if the plaintiff’s injuries arose from a car accident caused by the defendant’s drunk driving, federal bankruptcy law bars discharge of that debt. This means the victim can still seek to collect on a personal injury judgment even after the defendant exits bankruptcy.
It is also important to note that bankruptcy does not shield a person from personal injury claims that arise after their bankruptcy filing. In other words, say a negligent driver causes a car wreck that injures you. The driver filed for bankruptcy a week before the accident. The automatic stay in that case does not prevent you from immediately filing a personal injury lawsuit and seeking compensation, as the bankruptcy court has no jurisdiction over your claim.
Contact an Atlanta Car Accident Lawyer
Even when a negligent driver may be faced with potential bankruptcy, their auto insurance is often still available to compensate an accident victim. This is why it is useful to consult with a qualified Atlanta car accident attorney who can advise you of your rights and assist you in navigating the claims process. Contact Morain & Buckelew, LLC, today at (404) 448-3146, to schedule a free consultation.
Source:
scholar.google.com/scholar_case?case=11462981613312838864