If the person responsible for your accident files for bankruptcy during your lawsuit, an automatic stay is triggered, temporarily halting legal action against them. This means your case will be paused until the bankruptcy is resolved or the court grant permission for it to continue. The type of bankruptcy they file affects your claim, chapter 7 may discharge their personal liability, making it difficult to collect damages, while chapter 13 may require them to pay a portion through a structured repayment plan.

Even if the defendant’s bankruptcy limits their personal responsibility, insurance coverage may still be available. The automatic stay typically applies only to their personal assets, not their insurer. If the at-fault party had liability insurance at the time of the accident, you can still file a claim against their policy. In some cases, you may also request the bankruptcy to lift the stay, especially if your lawsuit only targets insurance proceeds and does no affect the defendant’s assets.

If the bankruptcy court discharges the defendant’s debt, your recovery may be limited to their insurance policy limits, meaning you might not receive full compensation. Additionally, delays caused by the bankruptcy process could impact your case, so its’s crucial to remain mindful of the statute of limitations for filling or appealing claims. Missing deadlines due to legal delays could prevent you from recovering any compensation at all.