Bankruptcy

What happens to your damages if you are declared bankrupt? Nobody wants to go bankrupt, but following a road traffic accident bankruptcy is a real risk as your income may reduce, meaning you are unable to meet your financial obligations.

A claim for damages is regarded as an assset. If you are declared bankrupt all of your assets are generally vested in the trustee in bankruptcy. Where an asset is vested in the trustee you are not allowed to bring legal proceedings to recover that asset without the trustee's authority. However, whether your claim for damages vests in the trustee depends on the damages suffered. The distinction is based on 2 cases decided back in 1840 as follows:

If you are claiming for purely financial loss the claim forms part of the estate and goes to the trustee (Rogers 1846); and
If your claim includes personal injury the action remains yours alone (Beckham 1849).

Where you pursue the claim and recover damages you have to pay the trustee any past financial losses or any future financial losses up to the end of the bankruptcy period. It is therefore important that the claim is not settled without separately identifying the damages being paid for each item of loss.

Further Information: Compensation Recovery Unit; Damages - Interest; Fatal Accidents; Future Losses; Insured Losses; Loss of future earnings – handicap on the open labour market; Medical Treatment Claims; Periodical Payments Order

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