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How does bankruptcy effect worker's compensation and/or personal injury claims?

Updated: Dec 7, 2020

By Sean Oswald of Strong Law Offices posted in Workers' Compensation on Monday, December 7, 2015.

I am often asked about how a client's worker's compensation or personal injury claim will be affected if they decide to file bankruptcy. When asked that we always have to sit down and discuss the specifics, but what does not often come up is what impact a new worker's compensation or personal injury claim may have on a previously filed bankruptcy.

As I meet with a client we discuss the injury they sustained and the medical treatment they are undergoing- but it doesn't naturally follow that every client will advise me if they have previously filed a bankruptcy. Many clients think that a filed bankruptcy should have no impact upon their injury claim, but that is not necessarily true at all. In fact, continued reporting requirements make it the obligation of the injured client to report to the bankruptcy court/trustee the existence of any personal injury or worker's compensation claim that arise after the filing of the bankruptcy and before the discharge of the bankruptcy. Failure to do so can have dire consequences for the plaintiff.

Courts all over Illinois have been finding that the failure to disclose the injury claim as an asset to the bankruptcy court is grounds to have their injury claim dismissed under the legal theory of judicial estoppel. Judicial estoppel is the legal principle that a party can not take 2 different positions in 2 different legal proceedings. It is intended to keep individuals from deceiving or gaming the court to receive a benefit such as receiving a discharge of debts while getting to keep any proceeds from the injury claim.

In a case known as Seymour v. Collins, the Illinois Supreme Court has recently made a new ruling which turns some of the previous conventional wisdom on its head. The previous requirement of an oath has been removed but the decision on the other hand seems to imply that the mere existence of the injury claim is not sufficient to trigger judicial estoppel but that there must be an intent to deceive the court. The question now is how to interpret this decision and how lower courts are going to apply it.

The important thing to remember if you have an injury claim is that a bankruptcy even if already filed can have a huge impact upon your claim. Should you have any questions with regard to this please discuss it with your lawyer immediately and make sure that your lawyer is aware of these changes to the state of the law.

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