Q&A - Can personal injury compensation be taken off me to cover bankruptcy debts?

Q: Last year I hit a pothole and came off my bike. At the time I appeared only to have a broken arm but what happened afterwards resulted in me becoming bankrupt. I’d borrowed money shortly before the accident to buy equipment and set up a mobile car repair business, but the broken arm meant I couldn’t work for two months. I then started getting headaches and panic attacks and struggled to remember things. It turned out I had also suffered a fractured skull. 

Because of not working I got into more debt and became depressed. Eventually I was forced to close the business and I was made personally bankrupt. I have now put in a claim against the local authority for compensation. Will the bankruptcy affect my claim?

A: This is not a straightforward situation and much will depend on what exactly you are claiming for.  In simple terms, any compensation awarded in respect of injury damages for pain and suffering would remain yours.  However, any compensation awarded for lost earnings or loss of profits during the period you were bankrupt will fall into your bankruptcy estate and belong to your Trustee in Bankruptcy. If you put in a successful claim for future losses and for care to look after yourself in the future, the money awarded will belong to you.  A complication can arise as the right to take court action belongs to the Trustee in Bankruptcy, so they need to be involved. 

It is important that you liaise with your Trustee in Bankruptcy and they will need to be involved if any Court proceedings are issued. But the key factor is to make sure that you instruct a solicitor to assist you with your claim and that you do not just rely on an insurance company “helping you out” by making you an offer for early settlement.

Article 14/10/2019

Robert Williams

Robert Williams

Partner and Complaints Handler

Partner and Head of the Civil Litigation, Personal Injury and Dispute Resolution team in Wrexham

Claire Parfitt

Claire Parfitt

Senior Solicitor

Senior Solicitor within our Civil Litigation team in Wrexham and Oswestry