I have one idea that you could probably use.
Biggest problem here is to place particles exactly inside skeletal mesh volume.
For simple damage that makes character drop few water drops just spawn emmiter around place character is hit.
For effect of everything falling down (like death of character). You can try to spawn multiple emmiters that have only burst and are attached to bones of this character. You probably need to create GPU particle emmiters that spawn particles inside cyllinders, then rotate, scale and move those cyllinders so they roughtly cover limb and torso space.
In case of death make skeletal mesh invisible and activate emitters. You could activate them from top one to bottom to have better effect of everything falling.
And use GPU particles they seem to be much better for this task
Or you could do soft body and physics way here. There are some topics that surfaced, but i do not have knowledge in this area.