The answer to that question is YES. At least here in the 5th Circuit. In Flugence v. Axis Surplus Ins., Case No. 13-30073 (5th Cir. 10/04/2013), the Fifth Circuit recently handed down an opinion that addressed this question again just as it did in the Reed v. Arlington case. It appears that there were still some unanswered questions after the Reed case. After the Flugence case, there are no remaining questions.
The 5th Circuit made it VERY clear, if you are in an active Chapter 13 Bankruptcy Case, then you MUST disclose any claim for car accident that you were in during your case. In fact, the reading of this case makes it clear that if you discover the right to receive or acquire ANY asset, then you must disclose it in your active chapter 13 bankruptcy case.
What does this mean in practice?
It means that if you are in the middle of an active chapter 13 and you get injured in a car accident, then you must disclose car accident in chapter 13 bankruptcy and the right to recover money. It means that if your relative passes away during your bankruptcy case, that you must disclose that right to inherit money or property. If you find out you have an potential right to recover or receive money, then you must contact your bankruptcy attorney and let him or her know.
Your attorney will get the appropriate details and update and amend your schedules to reflect this information. This now puts your creditors on notice about the potential claim. It also provides your trustee with information that can be used to evaluate your case.
Very likely it means that any money you recover will go to your trustee for distribution to your unsecured creditors. While this can feel like a bad result, it is just the idea of equity in a bankruptcy case. Any money you recover for an accident should go to pay your bills. It should not be used to go to Vegas or take a cruise. So the result in the courts are the results that should occur outside a bankruptcy case.
In our jurisdiction, the injury attorney would file a motion to represent the estate’s interest in the case. If there is a settlement in the case, then a motion to approve it would be filed in your case. When the Judge signs the order it likely would dictate that the money goes to your trustee for an accounting and then to be used to pay your creditors.
You can get into a lot of trouble if you do not disclose car accident in chapter 13 bankruptcy case. As the 5th Circuit pointed out, failure to disclose the accident is fraud upon the court. If you do not disclose the settlement, then the proceeds will go to the trustee to pay your creditors and the balance will go back to the person that you sued. You WON’T get ANY of the money. so by actually disclosing the accident, you may get back any money that is left over. That is a much greater incentive to do so than the possibility of losing it all if you don’t disclose.
Of course a good bankruptcy attorney would have told you all of this already. There are many rules in bankruptcy. There are many traps for the wary. If you need help navigating the bankruptcy realm, please call us today at (713) 974-1151 to schedule a no-obligation consultation or feel free to email us at email@example.com.
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