What happens to personal injury claims when a Claimant is declared bankrupt?

With the ongoing cost of living crisis showing no immediate signs of easing, economic difficulties are affecting many people. As a result, we are increasingly seeing cases where Claimants—particularly litigants in person—are declared bankrupt during the course of litigated proceedings. This article explores what this means for Defendants, and where the claim vests in such circumstances.

Bankrupt Claimants – a Summary

The number of bankruptcies in England and Wales peaked in 2009 and 2010 following the 2008–09 recession and has steadily declined since, with a further fall after the Covid-19 pandemic. Nevertheless, numbers remain significant: in 2022 there were 6,682 bankruptcies, rising to 7,598 in 2024. Given current financial pressures, there is a real risk of further increases.

Insurers rely on Claimants’ legal representatives carrying out due diligence before commencing a personal injury claim. Such checks should establish whether a prospective client has been declared bankrupt or is facing bankruptcy. Problems arise where Claimants become bankrupt during proceedings, or where bankrupt Claimants bring a new claim.

Can a bankrupt Claimant make a personal injury claim?

The short answer is: it depends. When an individual is made bankrupt, their estate vests in the trustee in bankruptcy. Section 283 of the Insolvency Act 1986 defines the bankrupt’s estate as:

• all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and
• any property which subsequently falls within the estate under the Act.

Certain items are excluded, such as essential tools for work and basic domestic necessities for the bankrupt and their family.

Section 436 provides a broad definition of “property”, including “things in action”—which, as established case law confirms, can include a personal injury claim. However, some actions do not vest in the trustee. In Heath v Tang [1993] 1 W.L.R. 1421, Hoffmann LJ observed that damages for pain in respect of “…body, mind or character” did not vest in the trustee.

This issue was considered in detail by the Court of Appeal in Ord v Upton [2000] Ch. 352. Mr Ord’s claim included damages for pain and suffering as well as past and future loss of earnings. The court held this to be a hybrid claim “part personal and in part relating to property.” While the personal element (general damages for pain and suffering alone) would not vest in the trustee, the financial element (special damages such as loss of earnings) would. As such, the claim as pleaded formed part of Mr Ord’s estate and vested in the trustee in bankruptcy.

The case highlights the importance of distinguishing between claims for general damages only (which remain personal to the bankrupt) and hybrid claims (which vest in the trustee). Attempting to pursue the latter in the bankrupt’s own name would amount to an abuse of process.

What this means for Defendants and Insurers

Where there is any indication that a Claimant may be impecunious, Defendants should check whether the Claimant has been declared bankrupt - this can be verified through the Individual Insolvency Register.

If the Claimant is declared bankrupt, any personal injury claim that includes special damages will vest in the trustee, who must then decide whether the claim has merit, what value it carries, and whether to pursue it on behalf of creditors. Proceedings will usually be stayed until the trustee’s position is clarified, and no further steps should be taken in the meantime.