The debtor filed for bankruptcy in the midst of being sued for their at-fault auto collision. Debtor has auto insurance to cover the damages of the people in the other vehicle. Debtor did not write this insurance policy in their filed bankruptcy schedules. Debtor concealed from the bankruptcy court that they had auto insurance policy. Is this bankruptcy fraud?
The court fully approved the creditor's proof of claim against the debtor. The debtor’s bankruptcy plan ordered them to pay for this approved claim. The insurance company gave debtor an attorney for the auto collision lawsuit. But, their insurance company never paid for the claim that the court approved. Yet, the debtor did pay on this claim that the bankruptcy court approved. Is this bad faith insurance?
The question would be is the insurance policy an asset that this person has at the time he declared the assets in the Chapter 7 proceeding. It is not like a 'car' or 'savings account'. The insurance policy has no particular value as an asset. Therefore, it would not be considered fraud to not list it as an asset. The next question arises as to whether a lawsuit can still go forward based upon the insurance policy, or whether a Chapter 7 discharge will have a permanent injunction on this matter; whether the debt preexisted or not; whether it was fraudulent, etc. No easy answers without analyzing in more detail the facts of this case. Please see more below.
Brian D. Lerner
Attorney at Law
Car / Auto Accident Lawyer
You would need to have the bankruptcy petition reviewed by an experienced attorney in your area. It's hard to say w/o more facts.
Chapter 7 Bankruptcy Attorney
I do not think the policy is an asset. The insurance company merely insures the potential liabilities of the debtor. Even if the debtor is being sued the insurance company is off the hook for coverage if the debtos liability is discharged. There is no possible law suit against the insurance company unless the coverage is for underinsured/uninsured motorist coverage, and even in that case if the liability of the debtor is discharged it would appear that the obligation of the insuranc company is waived unless the State law finds hat the injured person is a third party beneficiary with a right to go after the insurer.
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It is likely not an asset of the debtor and need not be listed. However, you should of been listed as a potential creditor is the person hit your vehicle. To pursue the insurance company of the debtor you would need to file a motion to modify the stay to pursue state court remedies against the insurance company only and not the debtor.
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