The bankruptcy of a negligent driver who caused injury to a husband and wife may prevent plaintiffs from actually seeking damages against the defendant, but it doesn’t shield the auto insurer from having to pay out.
That was the ruling of the Alabama Supreme Court in a recent case involving two car accident claimants. Although this is an out-of-state case, it deals with matters that could just as easily arise in Florida, and justices often consider rulings by sister courts that have weighed similar issues.
To understand the court’s ruling, we must first explain a bit about U.S. Bankruptcy Code and how it impacts personal injury claims. A Chapter 7 bankruptcy in particular involves a trustee who gathers and sells a debtor’s nonexempt assets and uses the proceeds to pay creditors in accordance with the provisions of bankruptcy law. Part of the debtor’s property may be subject to liens that can be paid to creditors. Continue reading →