New Jersey Bankruptcy Article
For Doctors & Medical Service Providers
TREATING THE ACCIDENT VICTIM and GETTING PAID
by Steven R. Neuner, Certified Business Bankruptcy Specialist
Most medical service providers who treat patients injured in automobile or other accidents are familiar with “attorney protection letters”. Your patient needs treatment as a result of the accident, and may not have insurance. You ask for and get a “protection letter” from the attorney representing your patient in a suit against the responsible parties. That letter promises that you will be paid from the settlement proceeds when and if there is a monetary recovery from settlement or trial. These protection letters, however, may be worthless, if you don’t also use a procedure set down in New Jersey’s statutes to protect your rights.
In two recent decisions, the U.S. Bankruptcy Court was asked to enforce liens on proceeds from a bankruptcy debtor’s personal injury settlement. In both cases, the Debtor’s personal injury attorney had provided a “letter of protection” before the bankruptcy was filed promising payment out of the settlement proceeds. The Debtor ended up in bankruptcy before the cases were settled and the recipients of these letters (a chiropractor, and a commercial lender) went to court to enforce their rights to payment out of the proceeds, as lien-holders. Judge Stripp, in two carefully-reasoned decisions, held that the protection letters were invalid and unenforceable, and that all the recipients had were the right to share pro-rata with all the other creditors in the proceeds when distributed by the bankruptcy Trustee. He held that under caselaw decided by New Jersey’s highest court, personal injury recoveries cannot validly be assigned before a judgment is entered. (He ignored, as inconsistent and therefore not valid, decisions of New Jersey’s trial court, a court of lesser authority, that said such protection letters were valid). Both of the creditors tried to argue that an “equitable lien” existed. Judge Stripp rejected these arguments, because New Jersey has a specific procedure by which doctors can record a lien on bodily injury proceeds, and having not used the rights available to them, they had lost the right to any equitable lien instead.
Worse, in one case, the creditor had ignored a notice setting the deadline to file a proof of claim in the bankruptcy case, and as a result lost its right to share in the distribution to creditors. In bankruptcy cases where there will be money to distribute, creditors receive notice that they must file a proof of claim to be paid. If they don’t file before the deadline given, their claim doesn’t get paid, or is paid only after payment in full to everyone that filed their claims on time.
The lesson is simple: protect your lien rights. If there is any question about payment, any nursing home, hospital, or New Jersey-licensed doctor or dentist providing treatment for accident related injuries should file a lien notice , following the procedure set down by statute. You must file a Notice of Medical Lien, with the County Clerk, in the county where the injuries were suffered. N.J.S.A. 2A:44-41. The notice must be filed within 90 days after the date of first treatment, care or maintenance , and before the injured patient or his/her legal representative receives any money for damages for the injuries. Id. The notice must provide: the name and address of the injured person; the date and location of the accident; the date of first treatment, care or maintenance; the name and address of the hospital, nursing home, physician or dentist; and if ascertainable by reasonable diligence, the names and addresses of the persons alleged to be liable for the injuries or damages sustained by the patient. Id. For the lien to be valid, you must also send a copy of the notice by registered mail or personal delivery, within 10 days of filing it with the County Clerk, to the injured person, and each person alleged to be liable for his/her damages, if the names and addresses of such liable parties can be ascertained by reasonable diligence. Of course, you will want to document your efforts to obtain this information.
What this gives you is the right to be paid out of the settlement or damages recovered, from the persons who pay money damages to your injured patient. N.J.S.A. 2A:44-43. Releases do not affect your lien rights. Id. If your lien is not satisfied, you may sue the persons making payment or their legal representatives , anytime up to one year after payment . Id. Of course, the parties are still free to challenge the amounts due, and demand an itemized statement of charges included and to examine the underlying records.
There are some limits on these rights. The lien rights only apply to hospitals or nursing homes in New Jersey and physicians or dentists licensed in New Jersey. N.J.S.A. 2A:44-36. It only applies to services (including pharmaceuticals, supplies, examinations, tests and therapies) rendered for treatment, care or maintenance to persons who sustained personal injuries in an accident caused by someone else’s negligence. Id. It therefore does not include claims arising from assault or battery. No lien applies in worker’s compensation cases. N.J.S.A. 2A:44-40. Physicians and dentists liens are limited to 25% of the total award, settlement or judgment. N.J.S.A. 2A:44-39 Hospital liens are based on applicable ward rates, and nursing home liens are based on the minimum per diem rate charged for ordinary patient care. N.J.S.A. 2A:44-39 and 39.1.
Not surprisingly, many of these victims end up in bankruptcy . Out of work and out of income, the bills pile up. If your patient files for bankruptcy, you must take further steps to protect your rights. Make sure you are receiving notices. If you hear that a patient is in bankruptcy, investigate. Don’t assume you are protected by not receiving notice. Call the bankruptcy court clerk or your patient or their attorney. Obtain the case number and the names and addresses of any bankruptcy trustee. File a proof of claim right away, clearly stating your name and address and telephone number, the amount due, the dates of treatment, and, if you have followed the lien procedure, asserting your lien rights. Although it is better to use the official form, if you do not have one, sending in a simple notice clearly stating that you have a claim and want to receive notices will protect your rights. However, make sure you get proof that what you filed got there. Send an extra copy with a return envelope, and ask the clerk to stamp the copy as filed and return it to you. Send everything by certified mail or overnight delivery. Send copies to the bankruptcy attorney and trustee if you know who they are. Keep file copies of everything. Diary ahead for 3-6 months and follow up. Pay attention to everything you get in the bankruptcy.
Most of all, don’t assume that no one gets paid in bankruptcy cases . Your author is amazed how often in these cases, creditors fail to file claims where there is money to pay them all or a substantial portion of their claims. As a result, their claims do not get paid and they lose, forever, any rights to payment. Advice from a competent and knowledgeable bankruptcy attorney is usually money well spent, at least until you know the ropes. Following these procedures, once learned, is a simple and cost effective way to avoid getting burned.
Steven R. Neuner, Esq . is a bankruptcy attorney and Chapter 7 Bankruptcy Trustee practicing, with Neuner and Ventura LLP in Marlton, New Jersey. (telephone number (856) 596-2828). He is Certified as a Business Bankruptcy Specialist by the American Bankruptcy Board of Certification. His practice focuses on business and commercial law issues as well as bankruptcy. He regularly represents businesses and individuals, as well as trustees, in all aspects of bankruptcy cases.
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