Just because you have a car accident does not mean that you will lose assets to other people who were involved. You must be responsible, or the accident must have been your fault. The police officer at the scene does not indicate who is at fault. Responsibility is determined in a court, ultimately, or by the insurance companies involved with the drivers if they reach an agreement. Sometimes, fault is clear, but laws do not determine liability, as it is a civil issue. If you are sued, you will need to defend yourself, or the court will assume that you are at fault, and it could issue a judgment to the other party.
Some assets that you may own cannot be taken in a lawsuit. Most commonly, retirement assets held in an employer-sponsored retirement plan may not be taken to satisfy a lawsuit. An employer-sponsored plan includes a 401k or 403b plan. These plans are given protection from lawsuits under federal law. Additionally, some states may allow similar protections to assets held in an Individual Retirement Account (IRA). If an auto accident lawsuit results in the garnishment of your wages or bank accounts, your disability or any other federal benefit cannot be garnished.
If you own assets, mainly a home, and your state offers generous homestead exemptions in a bankruptcy, you may be able to discharge your judgment by filing for bankruptcy. All nonexempt assets will be taken to settle a bankrupt person's bills, but he will be able to keep the exempt assets, such as large amounts of home equity if applicable, while the plaintiff in the auto accident lawsuit must stand in line with everyone else. IRA accounts also enjoy up to $1 million in protection in a bankruptcy. If an accident stems from drunk driving, or possibly other forms of negligence, the judgment is not dischargeable in the bankruptcy, and it must be paid.
A driver needs to protect his personal assets. Almost all states require drivers to purchase liability insurance at a very low level. Any driver should carry automotive liability insurance of at least up to the value of her net worth. It may be a good idea, depending on the circumstances, for a driver to carry more. If she cannot purchase automotive liability coverage sufficient for her needs, she can purchase umbrella liability coverage for a higher amount. Up to $1 million in umbrella coverage can usually be purchased for between $200 and $300 per year.