You've just lost a loved one due to someone else's negligence. While working through your grief, you've taken the difficult step of filing a wrongful death case in South Carolina. Then, you receive news that the defendant has filed for bankruptcy. Does this mean the end to your pursuit of justice?
Our Anderson wrongful death lawyer understands the frustration and anxiety this situation creates. The intersection of bankruptcy law and wrongful death claims involves specific legal processes that can significantly affect your case's outcome. However, bankruptcy doesn't automatically eliminate your right to compensation.
Understanding the Automatic Stay in Bankruptcy Cases
When someone files for bankruptcy in South Carolina, federal law immediately implements an "automatic stay" that temporarily halts most collection activities and pending lawsuits against the debtor. This automatic stay serves as a pause button on your wrongful death claim. Court proceedings, discovery processes, and settlement negotiations must stop immediately until you obtain special permission from the bankruptcy court.
The duration of the automatic stay depends on the type of bankruptcy filed. In Chapter 7 cases (liquidation), the stay typically remains in effect for three to six months. For Chapter 13 (reorganization for individuals) or Chapter 11 (reorganization for businesses), the stay could remain in effect for years.
Pausing the Statute of Limitations
The automatic stay generally pauses the statute of limitations for your wrongful death claim while in effect. South Carolina's wrongful death statute of limitations is typically three years from the date of death.
How Different Types of Bankruptcy Affect Your Claim
The type of bankruptcy filed by the defendant significantly affects how your wrongful death claim proceeds in South Carolina.
Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, the defendant's non-exempt assets are liquidated to pay creditors according to a specific priority order. As a wrongful death claimant, you become one of these creditors.
Your claim would be categorized as an unsecured debt, typically receiving payment only after secured creditors and priority claims are satisfied. In many Chapter 7 cases, there aren't enough assets to provide full compensation to unsecured creditors. You may only receive a percentage of what remains after secured creditors receive their payments.
Chapter 11 or Chapter 13 Bankruptcy
Chapter 11 and Chapter 13 are reorganization bankruptcies for businesses and individuals, respectively. In these cases, the defendant creates a repayment plan to settle debts over time, often at reduced amounts. Your wrongful death claim becomes part of this repayment plan. The bankruptcy court must approve how much of your claim will be paid and over what timeframe.
For instance, a medical practice in Columbia facing your wrongful death claim might file Chapter 11 bankruptcy and propose a plan that pays 40% of your judgment amount over five years. The bankruptcy judge would determine if this plan is fair and feasible based on the practice's financial situation.
Exceptions to Discharge for Wrongful Death Claims
Not all wrongful death claims can be eliminated through bankruptcy. South Carolina wrongful death claims arising from certain circumstances may be excepted from discharge.
Drunk Driving Incidents
Under 11 U.S.C. § 523(a)(9), debts for death or personal injury caused by the debtor's operation of a motor vehicle while intoxicated cannot be discharged in bankruptcy.
For example, if your family member died in a car crash caused by an intoxicated driver in Spartanburg, and that driver later files for bankruptcy, your wrongful death claim would survive the bankruptcy.
Willful and Malicious Conduct
Similar to fatal drunk driving accidents, debts for "willful and malicious injury" under 11 U.S.C. § 523(a)(6) are not dischargeable. This exception might apply if the defendant intentionally caused harm that resulted in death, as would be the case with intentional physical assault.
Steps to Protect Your Claim During Bankruptcy
When facing a defendant's debtor protection, wrongful death claim preservation requires prompt action.
File a Proof of Claim
To preserve your right to any distribution from the bankruptcy estate, you must file a proof of claim by the court-established deadline, usually 70 days after the bankruptcy filing in personal bankruptcies. This formally notifies the bankruptcy court of your wrongful death claim's existence and amount.
Without this filing, you may receive nothing from the bankruptcy proceedings, even if funds are available for distribution. Work with your Anderson wrongful death attorney to complete this form accurately, attaching documentation substantiating your claim's full value.
Request Relief from the Automatic Stay
You can petition the bankruptcy court for "relief from the automatic stay," allowing your wrongful death lawsuit to proceed while the bankruptcy case continues.
Courts often grant this relief for personal injury and wrongful death cases, especially when insurance coverage exists. This allows the case to move forward to determine liability and damages, even if collection might still be affected by the bankruptcy.
Monitor the Bankruptcy Proceedings
Stay informed about significant developments in the bankruptcy case that might affect your wrongful death claim. This includes attending the 341 meeting of creditors, reviewing the debtor's proposed repayment plan, and filing objections when appropriate.
If the defendant in your wrongful death case attempts to mischaracterize your claim or undervalue it in their bankruptcy filings, your timely objection can protect your interests.
Identify All Potentially Liable Parties
A comprehensive wrongful death case often involves multiple responsible parties. If one defendant files bankruptcy, focusing on other liable parties who haven't sought bankruptcy protection may provide alternative paths to compensation.
Insurance Coverage Considerations
Insurance policies typically remain available to satisfy claims despite the policyholder's bankruptcy. Liability insurance exists precisely to cover such situations.
If the defendant has applicable insurance coverage—such as auto liability insurance, homeowner's insurance, or a commercial general liability policy—the bankruptcy filing generally doesn't shield these insurance proceeds from your claim.
Be aware that insurance policies have coverage limits and exclusions that may affect your recovery. If your damages exceed the policy limits, the excess amount becomes a claim in the bankruptcy case.