Bankruptcy

Can I Discharge Auto Accident Damage Claim that Exceeds My Insurance Coverage?

I am being sued for an accident that occurred in the state of Tennessee. ??The injured party was offered a settlement by my insurance company, but has refused. ??If this goes to trial and the injured party is awarded way more than my insurance limits I know that I am responsible for the difference. ??I have no assets and nothing to offer so I know they will probably garnish my wages. ??Can I declare bankruptcy to get out from under what may a huge debt? ??The injured party is suing me for $1.5 million. ??Thank you! Margaret

Jonathan Ginsberg responds:?? Previously I had written a blog post about how an injured plaintiff can proceed if the defendant in a car accident claim files for bankruptcy.?? Generally, the defedant/debtor's insurance company will still be obligated to honor its coverage and the plaintiff can usually seek relief from the automatic stay to pursue insurance damages, but the plaintiff cannot pursue the debtor/defendant personally for damages beyond the policy limits.

Margaret would fall into the defendant/debtor situation?? If she files for bankruptcy, any damages above the insurance limits would be discharged as to her personally.?? The exception would be if Margaret's accident involved alcohol or drugs, or if there was some sort of intentional action by Margaret.

If I was advising Margaret, I would not rush into bankruptcy because of the possibility that the injured plaintiff might recover damages at trial that exceed insurance coverage.???? Margaret did not say how badly the plaintiff was injured, but in my experience plaintiff's lawyers often ask for a lot more than they hope to recover.?? Further, if Margaret is really judgment proof, it very well may be that the plaintiff will accept an insurance settlement within the insurance policy limit.

If the defense attorney provided to Margaret by her insurance carrier believes that there really is risk that a recovery could leave Margaret with personal liability, then she may wish to get a bankruptcy consultation sooner rather than later.

Full post as published by The BK Blawg on September 24, 2008 (boomark / email).