When the Person or Company That Injured You Files for Bankruptcy in California

By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.

What the automatic stay stops

The moment a bankruptcy petition is filed, the automatic stay in 11 U.S.C. § 362(a) takes effect. It bars starting or continuing a lawsuit against the debtor on a claim that arose before the filing, and it bars enforcing a judgment against the debtor or property of the bankruptcy estate. No court order is needed. If your case is already pending in a California superior court, it stops where it is, including discovery and any trial date.

The stay protects the debtor. Other defendants who have not filed, such as the employee who was driving a bankrupt company’s truck, can usually still be sued, although in some Chapter 11 cases the court extends protection to related parties.

The stay ends when the case is closed or dismissed, and in an individual’s Chapter 7 case or in a Chapter 11, 12, or 13 case it ends as to the debtor when a discharge is granted or denied (§ 362(c)). Violating the stay can lead to sanctions.

Asking for relief from stay to pursue the insurance

Under § 362(d)(1), the bankruptcy court must grant relief from the stay for cause after notice and a hearing, by terminating, modifying, or conditioning it.

A common motion asks the court to let the case go forward to judgment or settlement, with any recovery limited to the insurance proceeds. A request limited to insurance is often easier to grant because it usually takes nothing from the estate that other creditors would share. Any amount above the coverage stays a claim in the bankruptcy.

Proof of claim, the bar date, and other deadlines

A proof of claim tells the court and the trustee that the debtor owes you money. Any creditor may file one under 11 U.S.C. § 501, using Official Form 410. A filed claim is deemed allowed unless someone objects (§ 502(a)). An injury claim is usually unliquidated, meaning no court has fixed the amount yet, and the form lets you say so.

The filing deadline, called the bar date, depends on the type of case. Here are the key dates:

In Chapter 11, debtors often list injury claims as disputed, contingent, or unliquidated. Under Rule 3003(c)(2), a creditor listed that way who does not file a proof of claim will not be treated as a creditor for voting and distribution.

Who decides your injury claim

Bankruptcy judges handle most disputes over claims, but Congress set personal injury apart. Under 28 U.S.C. § 157(b)(2)(B), the bankruptcy court’s core power over claims does not include the liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims for purposes of distribution. Section 157(b)(5) directs that these claims be tried in federal district court, either where the bankruptcy is pending or where the claim arose, as the district court handling the bankruptcy decides.

Many injury claims are still resolved in the state court where they started, after relief from stay. Either way, a bankruptcy judge generally does not try your injury claim or put a dollar figure on it for paying creditors.

The insurance policy still pays

A discharge frees the debtor from personal liability. It does not free anyone else. 11 U.S.C. § 524(e) says the discharge of a debt does not affect the liability of any other entity on that debt, and a liability insurer is another entity.

California writes this protection into the policy. Insurance Code § 11580(b)(1) requires every liability policy issued in the state to provide that the insured’s insolvency or bankruptcy will not release the insurer from paying damages for injury that occurred during the policy period. Section 11580(b)(2) requires a provision allowing a person who obtains a bodily injury or death judgment against the insured to sue the insurer on the policy to collect it, subject to the policy’s terms and limits. If a policy leaves these terms out, the law reads them in.

Two practical limits apply. You generally need a judgment against the insured before suing the insurer under § 11580(b)(2). And after a discharge, lawyers often ask the bankruptcy court to confirm that a suit naming the debtor only to establish liability for insurance purposes does not violate the discharge injunction in § 524(a)(2).

When an individual files: injury debts that survive discharge

Most injury debts of an individual are discharged, apart from what insurance pays. Two exceptions in 11 U.S.C. § 523(a) matter most to injury victims:

• Willful and malicious injury, § 523(a)(6). It reaches deliberate harm, such as an assault, and ordinary carelessness does not qualify. You must file a complaint in the bankruptcy court within 60 days after the first date set for the meeting of creditors, or the debt is discharged (§ 523(c)(1); Rule 4007(c)).
• Intoxicated driving, § 523(a)(9). A debt for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft while unlawfully intoxicated from alcohol, a drug, or another substance is not discharged. The 60-day complaint deadline does not apply to this exception.

Chapter 13 has its own list. The discharge in § 1328(a) keeps the § 523(a)(9) exception and also excludes damages awarded in a civil action for willful or malicious injury that caused personal injury or death. A business that liquidates in Chapter 7 receives no discharge at all (§ 727(a)(1)), though once its assets are sold there may be little left to collect beyond insurance.

Your California filing deadline during the bankruptcy

California gives most injury victims two years to sue under Code of Civil Procedure § 335.1. The stay keeps you from filing against the debtor, and federal law accounts for that. Under 11 U.S.C. § 108(c), if your deadline had not run when the bankruptcy was filed, it does not expire until the later of the end of the original period or 30 days after notice that the stay has ended as to your claim.

If the stay lifts after the two-year mark has passed, you may have one month to file. Deadlines against defendants who are not in bankruptcy keep running the whole time.

Chapter 11 trusts and channeling injunctions

Some companies facing mass injury claims reorganize under Chapter 11 and send those claims to a trust. In asbestos cases, 11 U.S.C. § 524(g) lets the court issue an injunction that channels claims to a trust that pays them under set procedures. Outside that asbestos provision, the U.S. Supreme Court held in Harrington v. Purdue Pharma L.P. (2024) that the Bankruptcy Code does not authorize a plan to release claims against non-debtors without the affected claimants’ consent. If your claim is headed to a trust, read the plan’s voting and opt-out papers closely before the deadlines in them.

If the insurance company is the one that fails

Sometimes the at-fault party is solvent but its insurer is not. The California Insurance Guarantee Association, established under Insurance Code § 1063, pays covered claims of insolvent member insurers. Under § 1063.1, the claim must be presented by the deadline set in the insurer’s liquidation, coverage is capped at $500,000 per claim outside workers’ compensation, and the association does not pay to the extent other insurance covers the claim. Surplus lines insurers, which are not admitted in California, are not members.

After a car crash, that can mean your own uninsured motorist coverage pays first. Insurance Code § 11580.2(b) treats a vehicle as uninsured when its liability insurer cannot pay because of insolvency, if the insurer becomes insolvent within one year of the accident.

What this means for your case

• Get the bankruptcy case number, court, and chapter from the notice or from PACER, and pause all steps against the debtor until the stay is lifted or ends.
• Find out what liability insurance the debtor had on the date of the injury.
• File Official Form 410 before the bar date, even if you expect insurance to pay.
• If the injury was intentional, raise the discharge question right away, because the 60-day complaint deadline is strict.
• Keep medical records, bills, and the police or incident report, since the claim still has to be proven.
• Calendar the 30-day window under § 108(c) and your deadlines against every other defendant.

Beverly Law represents injury victims across California, including people hurt in Los Angeles car accidents and truck crashes where a defendant later files for bankruptcy. You owe no fees or costs unless we win. Call (310) 552-6959 for a free consultation.

Common questions

Related pages

Legal guides · California injury lawyers · Los Angeles injury lawyers · California truck accident lawyer · Injury law FAQs · California traumatic brain injury claims

Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Last reviewed: November 7, 2026.