How Bankruptcy Affects Damages for a Personal Injury or Malpractice Action

Posted by Geoff Aylward | Apr 03, 2022 | 0 Comments

Settlements for serious injury claims include amounts for different categories of damages: pain and suffering, loss of income, loss of future earnings, loss of ability to perform hold tasks, medical treatment, and future care.

In the meantime, the injuries could have prevented the claimant from working. Sometimes the claimant has no alternative except bankruptcy.  The Bankruptcy and Insolvency Act (BIA) does not affect the total damages payable by the Defendant, or the breakdown of those damages. But, it can result in a significant amount of the damage award being paid to the trustee in bankruptcy.

Injured persons are entitled to keep the full amount paid for pain and suffering, loss of housekeeping, medical care, and personal care.    

Damages payable for loss of income up to the date of bankruptcy form "property of the bankrupt."  Those damages are kept by the Trustee.

Damages payable for loss of income following the date of bankruptcy are allocated between the Trustee and the injured person.  These damages are deemed to be "revenue of the bankrupt."  The debtor keeps 100 percent of the minimal amount of revenue required to pay living and other expenses.  One-half of additional revenue is considered "surplus revenue."  The debtor keeps one-half of the surplus revenue.  The other half is paid to the Trustee. 

The Trustee cannot take anything from the settlement amount for income that would have been earned after the bankruptcy discharge.  A bankrupt plaintiff can be discharged from bankruptcy with nearly all or most of the future earnings award intact.

These general principles are contained in sections 67 and 68 of the Bankruptcy and Insolvency Act as interpreted by the Courts.  If you are bankrupt or contemplating bankruptcy, inform your lawyer immediately.  Newfoundland and Labrador lawyer Geoff Aylward has successfully represented bankrupt claimants.

About the Author

Geoff Aylward

LEGAL BACKGROUND AylwardLaw's core practice areas are Personal Injury, Disability Insurance, and Medical Malpractice. 


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