Can I claim compensation if I am bankrupt?

The short answer is, yes.

If you were involved in an accident before or during your bankruptcy, you can still make a claim for compensation, but you may not receive it all.

What is bankruptcy?

A person is made bankrupt when they can no longer repay their debts. It can be voluntary or imposed upon you by a creditor.

The period of bankruptcy begins with an order from the Court, and you will usually be discharged after 12 months, or maybe sooner if the debt is cleared.

During bankruptcy, you will usually be allowed to keep things you need for general living, for example, clothes, basic furniture and a modest vehicle used for work. Everything else will vest in the bankruptcy estate, and will likely be sold to repay some, or all, of your debts.

How bankruptcy affects your claim

A claim for damages (the legal term for compensation) following a road traffic accident usually consists of two elements: general damages and special damages.

General damages are awarded for things which cannot be calculated and includes any compensation for personal injury. Any compensation paid for general damages will be ‘ringfenced’ from the bankruptcy.

Special damages are awarded for things which can be calculated and includes compensation for things like loss of earnings and property damage.  Any compensation paid for special damages will likely vest in the bankruptcy estate.

Where a claim includes both general and special damages, it is considered a ‘hybrid claim’. The trustee will take ownership of the hybrid claim but keep any general damages in trust and pay this to you once any special damages have been used to repay any outstanding debt.

Procedure

If you are involved in an accident before or during your bankruptcy, you should notify us and send a copy of the bankruptcy order as soon as possible.

We will inform the trustee of the potential claim and request permission to begin. As the whole claim belongs to the trustee, we will need to keep them informed of the progress and seek certain instructions from them.

At the end of your claim, we will request confirmation from the trustee the amount they intend to keep to repay your debt and how much will be paid to you. Any money received will then be paid to the trustee who will administer the agreed amounts.

Legal proceedings

It is sometimes necessary to begin legal proceedings to resolve the claim. This could be because the other party refuses to accept responsibility, we cannot agree a settlement, or the claim is unlikely to settle before the relevant limitation period expires.

If court proceedings are necessary, we must seek permission from the trustee.

Assignment

The trustee may decide to assign the claim to you, so that you will be able to start or continue court proceedings. However, this procedure can be time consuming and expensive. You will normally be expected to pay the trustee’s legal costs, which can be significant.

Assignment should take place before the limitation period (3 years from the date of the accident) expiration of limitation period.