Can you get a lawsuit advance if you are in bankruptcy?

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

Your injury claim is part of the bankruptcy estate

When a bankruptcy case starts, an estate is created that includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” and it also takes in the “proceeds” of that property (11 U.S.C. 541(a)(1), (a)(6)). A claim for an accident that happened before you filed is one of those interests, even if no lawsuit has been filed yet. The debtor must file “a schedule of assets and liabilities” (11 U.S.C. 521(a)(1)(B)(i)), and the claim belongs on it.

Timing changes the answer. In Chapter 7, an accident that happens after you file is generally outside the estate, because section 541(a)(1) looks at what you owned on the filing date. Chapter 13 is broader: the estate also includes property “the debtor acquires after the commencement of the case” until the case is closed, dismissed or converted (11 U.S.C. 1306(a)(1)). A new injury claim during a Chapter 13 plan may have to be added. Credit history in general is covered on our bad credit page.

Exemptions that may protect an injury recovery

Federal law lets a filer choose the federal list in section 522(d) or the state’s list, “unless the State law that is applicable to the debtor” does not allow the federal list (11 U.S.C. 522(b)). California is one of those states: it declares the federal exemptions “not authorized in this state” (CCP 703.130).

Texas’s own exemption chapter, Property Code chapter 42, does not mention injury claims or settlements, so which list helps a Texas filer is a question for a Texas bankruptcy lawyer. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou.

Who controls the claim

In Chapter 7, “the trustee in a case under this title is the representative of the estate” and “has capacity to sue and be sued” (11 U.S.C. 323). The trustee’s job is to “collect and reduce to money the property of the estate” (11 U.S.C. 704(a)(1)). For an injury claim, the trustee usually decides whether to pursue it, and the bankruptcy judge may approve a settlement “after notice and a hearing” (Rule 9019(a)).

The trustee can also give the claim up. Property that is burdensome or “of inconsequential value and benefit to the estate” may be abandoned after notice and a hearing, and scheduled property not administered by the time the case closes is abandoned to the debtor. Property that is never abandoned and never administered “remains property of the estate” (11 U.S.C. 554). In Chapter 13 the debtor generally keeps possession (section 1306(b)).

Getting an advance during or after bankruptcy

An advance sells part of your future recovery, and while the claim belongs to the estate, that share is not yours alone to sell. A trustee may sell estate property outside the ordinary course of business only “after notice and a hearing” (11 U.S.C. 363(b)(1)), and a transfer of estate property made after the case starts that “is not authorized under this title or by the court” can be undone by the trustee (11 U.S.C. 549(a)). A contract you sign on your own in Chapter 7 may not hold up. In Chapter 13, ask your lawyer whether your plan or the court must approve the deal first.

After the case closes, the answer depends on what happened to the claim. If it was scheduled and abandoned, it came back to you. If it was never listed, section 554(d) says it can still belong to the estate, and the case may have to be reopened before anyone can safely buy a share of it.

Some funding contracts make a bankruptcy filing an event that makes money due, a term courts weigh when asking whether an advance is a loan. A false answer about bankruptcy on the application can trigger the fraud exception described in what happens if you lose.

Judicial estoppel: the risk of leaving the claim off

In the Ninth Circuit, which covers federal courts in California and Washington, a debtor “is judicially estopped from asserting a cause of action not raised” in the bankruptcy disclosures, and the duty to disclose “continues for the duration of the bankruptcy proceeding” (quoting Hamilton v. State Farm, 270 F.3d 778 (9th Cir. 2001)).

The court softened that rule for honest mistakes in Ah Quin v. County of Kauai Department of Transportation, 733 F.3d 267 (9th Cir. 2013). The plaintiff checked “None” for pending suits in her 2009 Chapter 7 case, then reopened it in 2010 and amended her schedules. The court held that the trial judge used the wrong standard and sent the case back to decide whether the omission was “mistaken” or “inadvertent” in the ordinary sense. Other courts use their own tests, so list the claim from the start.

What to ask before you sign

• Is my injury claim listed on my bankruptcy schedules, and has the trustee abandoned it?
• Does the trustee or the court need to approve this advance?
• Which exemption list applies to me, and how much of the recovery would it protect?
• Does the contract say anything about bankruptcy, and does a filing make money due?

Our contract red flags page has more terms to check, and the state law table shows which states regulate these contracts.

Common questions

Related pages

Cash advance on a lawsuit · Laws by state · Injury law FAQs

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. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.