1-877-581-3396
Submitted by the Bond & Botes Law Offices - Thursday, December 18, 2014
Bankruptcy as an Option After an Accident
If you are financially responsible for a car accident, bankruptcy may be one option depending on the facts and the type of debt. Debts arising from ordinary negligence in a car accident, including many unsecured claims for personal injury or property damage, are often dischargeable in a Chapter 7 bankruptcy if the debtor is otherwise entitled to a discharge and no Bankruptcy Code exception applies. Listing a debt in the bankruptcy schedules does not by itself guarantee that the debt will be discharged, and a valid lien that is not avoided may survive even when personal liability is discharged.
Two common Bankruptcy Code exceptions are especially relevant to accident-related debts, although other exceptions may apply depending on the facts and the bankruptcy chapter filed.
DUI or Intoxicated-Driving Accident
Under 11 U.S.C. § 523(a)(9), a debt for death or personal injury is not discharged when it was caused by the debtor’s operation of a motor vehicle that was unlawful because the debtor was intoxicated by alcohol, a drug, or another substance. This DUI-specific exception addresses death and personal-injury debt; property-damage debt is not covered by § 523(a)(9) solely because intoxication was involved, although another nondischargeability provision may apply. Criminal restitution, criminal fines, and certain governmental fines or penalties can be nondischargeable under separate Bankruptcy Code provisions; treatment of court costs and fees depends on the nature of the obligation.
Willful and Malicious Injury
Under 11 U.S.C. § 523(a)(6), a Chapter 7 discharge does not cover a debt for a willful and malicious injury by the debtor to another person or to another person’s property. An example may be deliberately driving a car into a neighbor’s fence with the intent to injure the property. For debts under § 523(a)(6), the creditor generally must timely ask the bankruptcy court to determine that the debt is nondischargeable; if the creditor does not do so, the debt may be discharged.
Whether and when these debts must be paid depends on the bankruptcy chapter, the type of claim, any court determination of nondischargeability, and the terms of a confirmed repayment plan.
Filing a Chapter 13 Bankruptcy May Help
A Chapter 13 Bankruptcy may provide a structured way to address accident-related debts through a court-approved repayment plan that generally lasts three (3) to five (5) years. However, filing Chapter 13 does not make every accident-related debt dischargeable. After completion of a standard Chapter 13 plan, debts for death or personal injury caused by unlawful intoxicated driving remain nondischargeable under 11 U.S.C. § 1328(a)(2) and § 523(a)(9); restitution or a criminal fine included in a criminal sentence remains nondischargeable under § 1328(a)(3); and restitution or damages awarded in a civil action for willful or malicious injury that caused personal injury or death are excepted under § 1328(a)(4). By contrast, debts for willful and malicious injury to property can be dischargeable after completion of a standard Chapter 13 plan even though they are generally nondischargeable in Chapter 7. If a nondischargeable balance remains after plan completion, the debtor may still owe it. Filing another Chapter 13 is not always available or equally effective; prior cases can affect discharge eligibility and the automatic stay, and some circumstances create a temporary filing bar.
If you owe debt related to an accident, an experienced bankruptcy attorney can review how the claim arose, whether an exception to discharge may apply, whether a creditor must seek a nondischargeability ruling, and how Chapter 7 or Chapter 13 would treat the debt in your circumstances.
At Bond & Botes Law Offices, our affiliated offices offer free initial consultations. Please feel free to call one of our conveniently located offices to set up a private consultation with one of our experienced attorneys. We will analyze your situation and help you understand your bankruptcy and debt-relief options so you can make an informed decision based on your circumstances.
Related ArticlesFrequently Asked Questions About Car Accident Debts and Bankruptcy
Can car accident debts be discharged in bankruptcy?
Many debts arising from an ordinary car accident may be dischargeable in bankruptcy, including many unsecured claims for personal injury or property damage. Whether a particular debt is discharged depends on the facts, the bankruptcy chapter, the debtor’s eligibility for a discharge, and whether a Bankruptcy Code exception applies. Listing a debt in the bankruptcy schedules does not by itself guarantee discharge, and a valid lien that is not avoided may survive bankruptcy.
Are debts from a DUI-related car accident dischargeable?
Under 11 U.S.C. § 523(a)(9), a debt for death or personal injury caused by the debtor’s unlawful operation of a motor vehicle while intoxicated by alcohol, drugs, or another substance is not dischargeable. Property-damage debt is not covered by § 523(a)(9) solely because intoxication was involved, although another nondischargeability provision may apply. Criminal restitution, criminal fines, and certain governmental penalties are addressed under separate Bankruptcy Code provisions.
What happens if a car accident involved willful and malicious injury?
In Chapter 7, 11 U.S.C. § 523(a)(6) generally prevents discharge of a debt for a willful and malicious injury by the debtor to another person or another person’s property. For a claim under § 523(a)(6), the creditor generally must timely ask the bankruptcy court to determine that the debt is nondischargeable. The result can depend on the facts and the bankruptcy chapter filed.
Can Chapter 13 help with car accident debt?
Chapter 13 may provide a structured way to address accident-related debt through a court-approved repayment plan that generally lasts three to five years. However, Chapter 13 does not make every accident-related debt dischargeable. Debts for death or personal injury caused by unlawful intoxicated driving, criminal restitution or fines, and certain civil restitution or damages arising from willful or malicious injury causing personal injury or death can remain nondischargeable after plan completion.
Can willful or malicious property-damage debt be treated differently in Chapter 13?
Potentially. A debt for willful and malicious injury to property that would generally be nondischargeable under § 523(a)(6) in Chapter 7 may be dischargeable after completion of a standard Chapter 13 plan because § 1328(a)(4) specifically addresses willful or malicious injury that caused personal injury or death. Other exceptions can still apply, so the result depends on the particular debt and the circumstances of the case.
This post is intended for general information only and does not constitute legal advice. To discuss your specific situation, we encourage you to schedule a confidential consultation with an attorney.
