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.
Filed under Chapter 7 issues, General consumer bankruptcy info by 
Ever since the passage of the BAPCPA changes to the bankruptcy laws in 2005, consumer advocates have held out hope that a new presidential administration might roll back some of the more hard line changes to the Bankruptcy Code. Although support for the BAPCPA laws was bi-partisan, some Democrats have attempted to tie the nation’s housing crisis in with the changes to the Code. You may remember that earlier this year Democratic leadership attempted to push through legislation that would permit bankruptcy judges to change the terms of mortgages.
Senator Obama’s selection of Senator Joe Biden of Delaware would seem to dim the hopes of consumer advocates hoping for consumer friendly changes to the bankruptcy laws. Delaware, as you may know, is the home to corporate headquarters of many large and small corporations. According to StreetDirectory.com, businesses choose Delaware simply because of their flexible corporate laws, highly respected Court of Chancery, a business-friendly State Government, and a customer service oriented Staff of the Delaware Division of Corporations.
Given that most of the large credit card banks are incorporated in Delaware, it should be no surprise that Senator Biden was one of only three Democrats who voted for the BAPCPA changes to the bankruptcy law and that he supported it enthusiastically. My colleague Carmen Dellutri, writing in the Bankruptcy Law Network blog, comments that when reflecting on the Senate debate about the BAPCPA laws, “the first thing that comes to mind is the passion that Senator MBNA (Biden) put into getting the bill passed. He was a staunch supporter of the bill. He was also very instrumental in getting many of the amendments stricken [that would have benefited consumers over lenders]. ”
The Associated Press reports that during the time the BAPCPA laws were being debated in the Senate, credit card lender MBNA paid a consulting fee to Hunter Biden, Senator Biden’s son. Further, the AP reports that “MBNA employees have poured more than $200,000 into Biden’s Senate campaigns over the past two decades, making donors working for the credit card company the senator’s largest source of campaign money.”
It is, of course, unclear how much influence a vice president Biden would have on Barack Obama or his policies. However, it would certainly not be surprising if bankruptcy reform is not at the top of the list should Mr. Obama find himself in the White House.
Filed under General consumer bankruptcy info by
