3 reasons a car crash may lead to a bankruptcy filing

On Behalf of | Jun 11, 2024 | Bankruptcy Law |

Bankruptcy can serve as a solution to overwhelming financial challenges. People may file for personal bankruptcy after a divorce or a major illness. Job loss is another reason why people sometimes need to file for bankruptcy despite having previously been quite responsible with their money.

Occasionally, a motor vehicle collision is the issue that forces someone to consider a bankruptcy filing. There are multiple different reasons why bankruptcy might be the best solution for someone’s financial hardship after a car crash. The three issues outlined below are among the most common reasons why those involved in wrecks may need to turn to bankruptcy for financial relief.

The other driver was uninsured

A small but concerning number of drivers do not carry the liability insurance required by the law. If they cause a crash, the other people involved in the incident may not have many options for compensation. A personal injury lawsuit can help in some cases, but those who can’t afford insurance may not have the capital necessary to pay for someone’s expenses. A crash caused by an uninsured driver could saddle someone with property damage losses and medical expenses that only bankruptcy can help them resolve.

The crash led to permanent injuries or death

Sometimes, even when someone can file an insurance claim for the maximum amount of compensation possible, that isn’t enough to cover the losses they suffered. If someone has a catastrophic injury after a car crash, they may never be able to return to work. If families lose their main wage earner or someone who provides uncompensated work in the home, the cost of offsetting those losses could go well beyond even the most generous insurance payment. The debts that develop after a crash deprives the family of a source of income and generates medical expenses may make bankruptcy the only viable solution.

The crash involved personal fault

Many insurance policies primarily offer liability coverage. When someone is to blame for a crash, their policy pays for other people’s losses. Unfortunately, but they may have massive expenses that their policy doesn’t cover. Someone who causes a collision may have injuries and other losses that cause significant financial hardship, and they may not be able to use insurance for those expenses. Although bankruptcy does not discharge judgments secured through lawsuits, it can help eliminate credit card debt and medical debts that people take on in the aftermath of a car crash.

Understanding why different personal experiences might make personal bankruptcy necessary can benefit those struggling with the financial consequences of a collision. Those who file for bankruptcy can work to take greater control of their finances after a major wreck accordingly.

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