By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.
Hurt by a company that filed bankruptcy in Washington?
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The automatic stay puts your case on hold
The moment a company files a bankruptcy petition, 11 U.S.C. § 362(a) stops anyone from starting or continuing a lawsuit against it on a claim that arose before the filing, or collecting a judgment already won. No court order is needed. A case pending in a Washington superior court freezes where it is.
The stay protects the company that filed. Claims against others who share the blame, such as an employee driver or a vehicle owner, usually keep moving, and their deadlines keep running. The stay lasts until the bankruptcy case is closed or dismissed or, in Chapter 11, until a discharge is granted or denied (§ 362(c)(2)). That can take a long time.
Chapter 7 or Chapter 11: why the difference matters
| Question | Chapter 7 | Chapter 11 |
|---|---|---|
| What happens to the business? | A trustee sells nonexempt property and pays creditors (U.S. Courts) | The company usually keeps operating and proposes a plan (U.S. Courts) |
| Does the company get a discharge? | No. Only individuals do (11 U.S.C. § 727(a)(1)) | Yes, on plan confirmation, unless the plan liquidates the company and it stops doing business (§ 1141(d)(1) and (3)) |
| Proof of claim deadline | 70 days after a voluntary case is filed (Rule 3002(c)) | A date the court sets (Rule 3003(c)(3)) |
The case may not be in Washington at all. A company can file where its principal place of business or assets have been, or where an affiliate’s case is pending (28 U.S.C. § 1408).
The insurance policy outlives the bankruptcy
Under 11 U.S.C. § 524(e), the discharge of a debtor’s debt does not affect the liability of any other entity on that debt, including a liability insurer. The discharge injunction in § 524(a)(2) only bars collecting the debt as a personal liability of the debtor. In In re Beeney, 142 B.R. 360 (9th Cir. BAP 1992), a car crash case from the appellate panel for the Ninth Circuit, which covers Washington, the injured man could keep suing the discharged debtor as long as he did not enforce a judgment against the debtor or his property. That left the insurance available to pay.
We found no Washington statute that lets an injured person sue the at-fault party’s liability insurer directly. In Tank v. State Farm Fire & Casualty Co., 105 Wn.2d 381 (1986), the Washington Supreme Court held that third-party claimants may not sue an insurance company directly for breach of the duty of good faith, because that duty runs to the insured. So the insurance money is reached through a claim against the company itself. California’s rules differ; see our California guide on defendants who file bankruptcy.
Asking the court to lift the stay
Under § 362(d)(1), the bankruptcy court must grant relief from the stay “for cause” after notice and a hearing. One approach is to ask that the injury case go forward while agreeing to collect only from insurance, which leaves the estate’s other assets for other creditors.
Courts in the Ninth Circuit often weigh the factors in In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984), which the appellate panel called appropriate, nonexclusive factors in In re Kronemyer, 405 B.R. 915 (9th Cir. BAP 2009). One asks whether the debtor’s insurance carrier has assumed full financial responsibility for defending the case.
A bankruptcy judge does not decide what your injury claim is worth for payment. 28 U.S.C. § 157(b)(2)(B) keeps the liquidation or estimation of personal injury and wrongful death claims for distribution outside the bankruptcy court’s core powers, and § 157(b)(5) sends them to trial in federal district court, where the bankruptcy is pending or where the claim arose. Once the stay is lifted, the case can also return to the court where it started.
File a proof of claim even if insurance should pay
A proof of claim, filed on Official Form 410, puts you on the list of creditors. The policy limit may be lower than your losses, or the insurer may dispute coverage. The unpaid part is a claim against the estate.
| Situation | Deadline | Rule |
|---|---|---|
| Voluntary Chapter 7 | 70 days after the order for relief (the filing date) | Rule 3002(c) |
| Chapter 7 “no asset” case where money later turns up | At least 90 days’ notice of a new deadline | Rule 3002(c)(5) |
| Chapter 11 | The bar date set by the court | Rule 3003(c)(3) |
Chapter 11 has a trap. Injury claims are often left off the company’s schedules or listed as disputed, contingent or unliquidated. A creditor in that position who misses the bar date will not be treated as a creditor for voting and distribution (Rule 3003(c)(2)), and plan confirmation can discharge the debt whether or not a claim was filed (§ 1141(d)(1)).
Washington’s three-year deadline and the 30-day window
| Deadline | Applies to | Source |
|---|---|---|
| 3 years | Personal injury lawsuit in Washington | RCW 4.16.080(2) |
| The later of the original deadline or 30 days after notice that the stay ended | Suit against the bankrupt company, if the deadline had not passed when it filed | 11 U.S.C. § 108(c) |
| No extension | Suits against people or businesses that did not file | § 108(c) covers claims against the debtor |
Thirty days goes fast. If the stay is lifted after your three years have passed, that window may be all you have.
If the insurance company is the one that failed
When a court finds an insurer insolvent and orders it liquidated, the Washington Insurance Guaranty Association may pay covered claims under chapter 48.32 RCW. The Office of the Insurance Commissioner lists Western Guaranty Fund Services as the contact for auto, home and business claims (OIC).
| Rule | What the statute says | Source |
|---|---|---|
| Which policies | Direct insurance except life, title, surety, disability, credit, mortgage guaranty, workers’ compensation and ocean marine | RCW 48.32.020 |
| Which insurers | Authorized in Washington when the policy was issued or the insured event happened, and ordered liquidated | RCW 48.32.030(5) |
| Who is covered | Claimant or insured lived in Washington at the time of the insured event | RCW 48.32.030(4) |
| How much | The part of each claim over $100 and under $300,000, never more than the policy amount | RCW 48.32.060(1)(a) |
| Filing deadline | Claims filed after the final date the liquidation court sets are not covered | RCW 48.32.030(4)(a) |
| Your own policy first | Claims under your own policy must be exhausted first; the payment is reduced by that recovery | RCW 48.32.100 |
| Pending lawsuits | Paused 180 days from the insolvency finding, plus any time the court adds | RCW 48.32.160 |
The statute sets no fixed number of days for that claim deadline, so watch for notices from the receiver. After a crash, your own coverage may matter. Under RCW 48.22.040, a vehicle whose liability insurer cannot pay because it is insolvent counts as underinsured under your own underinsured motorist coverage, if that insurer becomes insolvent within three years after the crash. See our Washington uninsured motorist lawyer page.
What this means for your case
- Get the bankruptcy case number, court and chapter, and stop any new filing or collection against the company.
- Ask for the company’s liability policies: insurer, policy number, limits and any excess coverage.
- File Official Form 410 before the claim deadline, even if insurance should pay.
- Decide whether to ask for relief from the stay limited to insurance proceeds.
- Keep pursuing anyone else who shares the blame. Their deadlines did not stop.
- Track your three-year date and the 30-day window under § 108(c).
Read more on our Beverly Law in Washington page, or call Beverly Law at (310) 552-6959 for a free review in English or Spanish. You owe no fees or costs unless we win.
Common questions
Can I still sue the employee or another company that caused my injury?
Usually, yes. The automatic stay in 11 U.S.C. § 362(a) protects the debtor that filed. Claims against an employee, a vehicle owner or another business that did not file can generally go forward, and the deadlines for those claims keep running.
Can I sue the company’s insurance company directly in Washington?
We found no Washington statute that allows it, and in Tank v. State Farm (1986) the Washington Supreme Court held that third-party claimants may not sue an insurer directly for breach of the duty of good faith. The insurance is normally reached through a claim against the company, after the bankruptcy court lifts the stay.
Will a bankruptcy judge decide how much my injury claim is worth?
Generally, no. Under 28 U.S.C. § 157(b)(2)(B) and (b)(5), personal injury and wrongful death claims are tried in federal district court, not bankruptcy court. If the stay is lifted, the case can also proceed in the court where it was first filed.
The company filed Chapter 7 and has no money. Is my claim worthless?
Not necessarily. A company gets no Chapter 7 discharge, and under 11 U.S.C. § 524(e) a discharge would not release its insurer anyway. If a liability policy covered the incident, you can ask the court to lift the stay so you can pursue that coverage.
What does the guaranty association pay if the at-fault company’s insurer goes under?
Under RCW 48.32.060, the Washington Insurance Guaranty Association pays the part of a covered claim over $100 and under $300,000, never more than the policy limit. The claim must be filed before the final date the liquidation court sets.
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Related pages
Beverly Law in Washington · Injury claims when the defendant files bankruptcy in California · Personal injury statute of limitations in California, Texas and Washington · Washington uninsured motorist lawyer · Washington truck accident lawyer · Washington wrongful death lawyer
Sources
- 11 U.S.C. § 362, automatic stay and relief from stay
- 11 U.S.C. § 524, effect of discharge; other entities remain liable
- 11 U.S.C. § 108(c), extension of time after the stay ends
- 11 U.S.C. § 727(a)(1), no Chapter 7 discharge for non-individuals
- 11 U.S.C. § 1141(d), effect of Chapter 11 plan confirmation
- 28 U.S.C. § 157, bankruptcy court powers and personal injury claims
- 28 U.S.C. § 1408, where a bankruptcy case may be filed
- Federal Rule of Bankruptcy Procedure 3002, filing proofs of claim
- Federal Rule of Bankruptcy Procedure 3003, Chapter 11 claims and bar date
- U.S. Courts, Official Form 410, Proof of Claim
- U.S. Courts, Chapter 7 bankruptcy basics
- U.S. Courts, Chapter 11 bankruptcy basics
- In re Beeney, 142 B.R. 360 (9th Cir. BAP 1992)
- In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984)
- In re Kronemyer, 405 B.R. 915 (9th Cir. BAP 2009)
- Tank v. State Farm Fire & Casualty Co., 105 Wn.2d 381 (1986)
- RCW 4.16.080, three-year limitation period
- RCW 48.22.040, underinsured motorist coverage when the at-fault driver’s insurer is insolvent
- Chapter 48.32 RCW, Washington Insurance Guaranty Association Act
- RCW 48.32.020, scope of the guaranty association act
- RCW 48.32.030, definitions of covered claim and insolvent insurer
- RCW 48.32.060, association’s obligation and $300,000 limit
- RCW 48.32.100, nonduplication of recovery
- RCW 48.32.160, 180-day stay of proceedings
- Washington Office of the Insurance Commissioner, What’s a guaranty association and how does it work?
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 11, 2026.