If you injured someone by unlawfully driving while intoxicated, bankruptcy doesn’t discharge the resulting obligation.
Our last 5 blog posts have been about how bankruptcy deals with “priority” debts. We have focused so far on child/spousal support, wages owed employees, and income taxes. See Sections 507(a)(1),(4), and (8) of the U.S. Bankruptcy Code.
Today we look at another type of priority debt, one that many people don’t realize is a priority one. It is the newest priority debt, from the last major overhaul of the Bankruptcy Code in 2005.
Unlawful Operation of a Vehicle while Intoxicated
The Code’s definition for this type of debt is a claim “for death or personal injury resulting from the operation of a motor vehicle or vessel if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.”
So, if you drive while legally intoxicated, causing injury or death, that party’s claim against you is a priority debt.
So What? What Does It Matter?
There are two main legal consequences, one under Chapter 7 and one under Chapter 13.
First, under a Chapter 7 “straight bankruptcy” case your trustee pays your priority debts in full before paying other debts. But usually all of your assets are “exempt,” protected from bankruptcy trustee liquidation. So there’s no money for the trustee to pay any creditors, including the priority debts. So there’s no practical benefit to the driving-while-intoxicated debt being a priority debt in that situation.
Second, under a Chapter 13 “adjustment of debts” your court-approved payment plan must “provide for the full payment” of all debts “entitled to priority.” So you have to budget enough to pay off the driving-while-intoxicated debt during the case’s 3 to 5 years. You can and must pay that in full before paying anything on non-priority unsecured debts. But if that debt is very large, you may not have enough disposable income to pay it off in time. As a result a Chapter 13 case may not be feasible.
“Priority” vs. “Nondischargeable” Debts
But there’s another angle to this that’s probably even more important. One big recent theme has been whether a debt that’s a priority debt also cannot be discharged (forever written off).
For example, all past-due child/spousal support is priority debt, with the Chapter 7 and Chapter 13 consequences we outlined above. And bankruptcy never discharges support.
But bankruptcy CAN discharge some priority debts. For example, if you owed unpaid wages to a former employee, that could be a priority debt. But most likely that type of debt would be dischargeable. If you filed a Chapter 7 case, it would discharge the debt.
How about debts for driving while intoxicated?
They’re like support obligations: they are both priority debts and nondischargeable.
The Bankruptcy Code’s language above making these debts priority ones is very similar to the language elsewhere making them nondischargeable. So, you can’t discharge a debt “for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.” Section 523(a)(9).
The Bottom Line
Neither Chapter 7 nor 13 discharges debts from driving while intoxicated. In a Chapter 13 payment plan you must pay such debts in full. Bankruptcy law highly favors this type of debt.