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“Priority” Debts for Injuries from Driving while Intoxicated

September 16th, 2016 at 7:00 am

If you injured someone by unlawfully driving while intoxicated, the resulting obligation can’t be discharged in bankruptcy.  

 

Our last 5 blog posts have been about how bankruptcy deals with “priority” debts. The specific types of priority debts we’ve focused on so far are 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, described as such by Congress in 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 theme of these last few blog posts has been whether a debt that is a priority debt also cannot be discharged (forever written off).

For example, all unpaid child/spousal support is priority debt, with the Chapter 7 and Chapter 13 consequences outlined above. And support also can never be discharged.

But some priority debts CAN be discharged. To use the example of our most recent blog post, 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, the debt would likely be discharged.

How about debts for driving while intoxicated?

They’re like support obligations: they are both priority debts and nondischargeable.

The language from the Bankruptcy Code quoted above making these debts priority ones is very similar to language elsewhere in the Code 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

Debts from driving while intoxicated can’t be discharged under either a Chapter 7 or 13. They must be paid in full within a Chapter 13 plan. These are a highly favored type of debts under the law.

Written by Staff Writer

September 16th, 2016 at 7:00 am

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