The trucking company that caused your accident just filed for bankruptcy. Your lawsuit is frozen. Your attorney says they can’t proceed. You’re panicking—will you get anything for your catastrophic injuries?
The answer is usually yes—depending on coverage, court orders, and policy limits—but you must act quickly. Federal bankruptcy law creates barriers, but careful navigation of bankruptcy procedures and insurance law provides a path to compensation.
Parker & McConkie Injury Lawyers represents truck accident victims throughout Salt Lake County. Call (801) 851-1202 or visit our contact page for a free consultation.
Key Takeaways for Claims When Trucking Companies Go Bankrupt
- You can usually still recover through insurance despite a trucking company bankruptcy, depending on coverage and court orders.
- A federal automatic stay under 11 U.S.C. § 362 stops actions against the debtor, but courts typically grant relief from stay allowing proceedings nominally against the debtor to establish liability, with collection limited to insurance.
- Utah Code § 31A-22-201(6) permits direct action after obtaining judgment and having execution returned unsatisfied.
- You must file a proof of claim in bankruptcy court by the bar date when one is set.
- Insurance policies typically require naming the insured carrier to trigger defense and indemnity, necessitating stay relief.
What Happens When a Trucking Company Files Bankruptcy
Chapter 7 liquidation under 11 U.S.C. § 701 et seq. means the company ceases operations while a trustee sells assets to pay creditors. Chapter 11 reorganization under 11 U.S.C. § 1101 et seq. allows the company to continue operating while restructuring debts.
Utah’s trucking industry includes hundreds of small operations with thin profit margins. Rising costs and declining freight volumes have caused waves of trucking bankruptcies in recent years.
The Automatic Stay: Why Your Lawsuit Stops
11 U.S.C. § 362 creates an automatic stay that takes effect immediately when a company files bankruptcy. Your pending lawsuit freezes. You cannot continue settlement negotiations or demand payment from the company.
Most insurance policies require naming the insured carrier to trigger defense and indemnity obligations, which is why you must seek limited stay relief even though you only seek to collect from insurance, not from estate assets.
Relief From Stay: Your Path to Establishing Liability
Your primary path involves seeking relief from the automatic stay. Courts typically grant relief allowing you to proceed nominally against the debtor to liquidate liability—establish fault and damages—with collection limited solely to insurance coverage and not estate assets.
Courts grant stay relief when proceedings won’t prejudice the estate. Because the insurer’s duty to defend continues despite bankruptcy and policy proceeds typically don’t constitute estate property, courts find no harm to creditors. The order should expressly permit discovery from the debtor, including document requests and Rule 30(b)(6) depositions, to avoid later disputes about permissible investigation.
Why Insurance Proceeds Generally Remain Available
Insurance policies are technically assets of the bankruptcy estate, but proceeds from liability coverage for third-party claims generally do not become property of the estate. Exceptions exist—wasting or eroding policy limits among competing claimants, shared insurance towers with self-insured retentions, or specific policy structures might trigger estate-interest arguments requiring tighter stay language—but courts typically recognize that insurance pays you directly rather than into the bankruptcy estate.
Utah’s Direct Action Statute Process
Utah Code § 31A-22-201(6) provides an additional avenue requiring specific sequencing. First, you must obtain a judgment against the insured trucking company. Second, you must have execution returned unsatisfied—meaning attempts to collect from the debtor fail. Third, you may then bring a direct action against the insurer.
The practical steps involve seeking stay relief to liquidate the judgment against the debtor, then returning execution unsatisfied (or establishing futility per court order) before suing the insurer. This process ensures all prerequisites are met before pursuing direct action.
Proof of Claim: Preserving Rights to Estate Assets
Despite pursuing insurance, you must file a proof of claim in bankruptcy court. 11 U.S.C. § 501 governs this process.
For Chapter 7 cases with assets, Federal Rule of Bankruptcy Procedure 3002(c) generally requires non-governmental creditors to file within 70 days after the order for relief (the petition date in voluntary cases). No-asset Chapter 7 cases have no initial bar date until assets are discovered. In Chapter 11 cases, the court sets the bar date by order. Missing these deadlines permanently bars your claim.
Proving Insurance Coverage Existed at the Time of the Accident
Establishing liability and pursuing insurance requires proving coverage existed when the truck hit you. Evidence disappears as bankrupt companies liquidate.
Police reports frequently list insurance information. Insurance cards exchanged after the accident provide carrier details. FMCSA Licensing & Insurance filings, including Form MCS-90 financial responsibility filings, show federally required financial responsibility for interstate carriers. Note that MCS-90 functions as a surety-style endorsement protecting the public and does not create coverage for the carrier—insurers who pay solely because of MCS-90 may seek reimbursement from the insured.
Critical evidence to prove insurance coverage includes:
- Police accident reports documenting insurance information collected at the scene.
- Insurance identification cards exchanged after the accident showing carrier name, policy number, and effective dates.
- FMCSA Licensing & Insurance records showing Form MCS-90 endorsements and BMC-91X/BMC-91 financial responsibility filings.
- Bankruptcy court schedules where the company may list insurance policies, though subpoenas to insurers are usually required.
- Photographs from the accident scene showing the truck’s company name and DOT number.
- Subpoenaed records from insurance companies obtained through attorney authority.
Immediate attorney involvement is essential to gather evidence before records are destroyed during liquidation.
Competing Claimants and Policy Limits
Multiple truck accident victims may have claims against the same bankrupt trucking company, creating competition for limited insurance policy limits. When claims exceed available coverage, insurers sometimes file interpleader actions depositing policy limits with the court for allocation among claimants.
Understanding the complete insurance structure becomes critical—primary limits, excess layers, self-insured retentions, umbrella coverage, and any tower erosion from other claims. Your attorney must identify all available coverage sources and potential interpleader risks when positioning your claim among competing parties.
What If the Trucking Company Had No Insurance?
If the bankrupt company lacked coverage when the accident occurred, check your auto insurance policy for UM/UIM coverage under Utah Code § 31A-22-305. This coverage pays when you’re hit by drivers without insurance or drivers with insufficient coverage.
UM/UIM claims are subject to policy notice requirements, consent-to-settle provisions requiring your insurer’s approval before settling with the at-fault party (violating this consent requirement can forfeit UIM coverage), and set-off provisions reducing recovery by amounts already paid by the at-fault driver’s liability carrier. Failing to comply with these conditions can forfeit coverage entirely.
Time-Critical Deadlines You Must Meet
For Chapter 7 cases with assets, non-governmental creditors generally have 70 days after the order for relief (the petition date in voluntary cases) to file proofs of claim under Federal Rule of Bankruptcy Procedure 3002(c). No-asset Chapter 7 cases have no initial bar date. In Chapter 11 cases, the court sets the bar date by order.
The underlying negligence claim faces Utah’s four-year statute of limitations under Utah Code § 78B-2-307. 11 U.S.C. § 108(c) provides bankruptcy tolling—if a state statute of limitations would expire during the stay, it extends to the later of the original deadline or 30 days after the stay terminates. Direct action timing follows contract principles and any policy suit-limitation clause, which may be shorter than Utah’s six-year contract default.
Critical deadlines:
- Proof of claim filing deadline of 70 days after the order for relief in asset Chapter 7 cases, or bar date set by court order in Chapter 11 cases.
- Four-year statute of limitations under Utah Code § 78B-2-307 for the underlying negligence claim, subject to bankruptcy tolling under 11 U.S.C. § 108(c).
- Motion deadlines for seeking relief from the automatic stay to establish liability and collect from insurance.
- Evidence preservation requires immediate action as companies destroy records during liquidation.
These deadlines are strictly enforced, making immediate legal help essential.
Common Mistakes That Cost You Compensation
Assuming bankruptcy means no recovery is the most devastating mistake. Missing proof of claim deadlines permanently bars recovery from any bankruptcy assets. Not investigating insurance coverage allows carriers to deny claims without challenge.
Waiting for bankruptcy to resolve—which can take years—lets statutes of limitations expire. Not checking your own UM/UIM coverage overlooks a critical recovery source. Failing to comply with UM/UIM policy notice and consent requirements can forfeit coverage entirely.
FAQ: Trucking Company Bankruptcy and Your Injury Claim
What Happens If the Trucking Company’s Insurance Policy Limits Are Too Low to Cover My Damages?
When the bankrupt trucking company carries inadequate insurance, your own UM/UIM coverage under Utah Code § 31A-22-305 provides additional compensation up to your policy limits, minus amounts already recovered through set-off provisions. You remain a creditor in the bankruptcy case for damages exceeding insurance coverage, though recovery from the estate is unlikely. Stacking provisions in your policy may allow combining coverage from multiple vehicles you insure, though Utah law limits stacking in many circumstances.
Can the Bankruptcy Trustee Take My Insurance Settlement to Pay Other Creditors?
Generally no. Insurance proceeds from liability policies covering third-party injury claims typically are not property of the bankruptcy estate. When courts grant relief from stay to establish liability and collect solely from insurance, they recognize these proceeds won’t benefit other creditors. However, exceptions exist—if the debtor had already received settlement funds before bankruptcy filing, those funds might become estate property, or competing claimants and wasting limits might create allocation issues. Pursuing insurance claims promptly protects your recovery.
What If the Trucking Company Disputes They Were at Fault Before Filing Bankruptcy?
You must still establish fault through litigation, which requires relief from stay. Your motion should explain that you seek only to liquidate liability and collect from insurance without affecting bankruptcy estate assets. Courts grant relief showing a lack of prejudice to the estate. Expect the insurance carrier to defend itself vigorously—insurers have independent interests in disputing coverage and liability. Your stay relief order should expressly authorize discovery from both the debtor and insurer, including document requests and depositions.
How Does Bankruptcy Affect Ongoing Settlement Negotiations That Were Almost Complete?
Bankruptcy filing halts and prevents consummation or approval of settlement agreements absent court permission. Unapproved prepetition deals become unenforceable without relief or approval from the bankruptcy court. Negotiations must restart from the beginning. The automatic stay prevents the trucking company from settling with you without bankruptcy court approval. You must file your proof of claim and seek stay relief to resume negotiations. Insurance companies sometimes use bankruptcy as leverage to reduce settlement offers, but your willingness to litigate through stay relief proceedings may motivate insurers to settle reasonably.
What Information Should I Gather Immediately When I Learn the Trucking Company Filed Bankruptcy?
Obtain the bankruptcy case number, chapter filed, filing date, and assigned judge from PACER or the bankruptcy court website. Identify the trustee and their contact information. Calendar the proof of claim deadline immediately—calculate 70 days after the order for relief (petition date) for asset Chapter 7 cases, or watch for court orders in Chapter 11 cases. Save the bankruptcy petition and schedules showing listed assets, including insurance policies. Gather evidence of insurance coverage immediately before records are destroyed. Create a timeline of your accident, treatment, and pre-bankruptcy communications to present in your stay relief motion.
Protecting Your Claim When Trucking Companies Go Bankrupt
Trucking company bankruptcy creates challenges but usually doesn’t eliminate your path to compensation, depending on coverage, court orders, and policy limits. Courts typically grant relief from stay allowing you to proceed nominally against the debtor to liquidate liability with collection limited to insurance. Utah law provides additional remedies after obtaining judgment and having execution returned unsatisfied.
Parker & McConkie Injury Lawyers represents truck accident victims throughout Salt Lake County. We work on a contingency fee basis—you pay no attorney fees unless we recover compensation for you. Case costs might apply.
Call (801) 851-1202 or visit our office at 466 S 500 E, Suite 100, Salt Lake City, UT 84102 for a free urgent consultation. When trucking companies file bankruptcy, every day matters. Contact us immediately to protect your claim.
