Bankruptcy writes off claims against you from a vehicle accident for personal injuries and property damage, IF you weren’t intoxicated.
Vehicle Accident Claims
If you had a vehicle accident, you could owe many kinds of debts from it. You could be liable for any injured party’s current and future medical bills, loss of wages, pain and suffering, and other forms of damages. You could owe for property damage to vehicles and also to any building or traffic barriers or signs.
Your insurance may cover all of these obligations. Of course if you have no insurance, it’s all on you. More likely you have insurance but not enough. Especially if you have only the legal minimum coverage, a major accident and/or one with multiple vehicles could easily result in damages more than your insurance limits. Then you’d be on the hook for everything insurance doesn’t cover. That could amount to tens or even hundreds of thousands of dollars.
Bankruptcy would usually write off (“discharge”) whatever you’d owe.
Accident Claims of Unknown Amounts
It doesn’t matter if you don’t know how much you’ll owe. Often you don’t until many months or sometimes even years after the accident. As long as you file bankruptcy after the accident, all claims from the accident are covered by your bankruptcy case.
Bankruptcy law makes that clear.
Bankruptcy discharges most debts. The U.S. Bankruptcy Code defines a “debt” as a “liability on a claim.” In other words, you have some legal obligation to somebody.
But that legal obligation does not need to be reduced to a fixed dollar amount. A “claim” is defined as a “right to payment, whether or not… liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed…
“Unliquidated” means that the amount of the claim is unknown. For example, medical expenses are still accruing. “Contingent” means that the event that triggers whether or not you are liable has not yet happened. For example, a dispute about whether somebody else’s insurance covers the claim has not yet been resolved. “Disputed” means that a question remains whether the claim against you is legally valid. For example, the cause of the accident is still being litigated.
In all these non-fixed-debt situations, bankruptcy would still usually discharge any debts related to claims arising out of the accident.
The Intoxication Exception
However, bankruptcy does not write off accident claims if you were driving intoxicated.
Specifically, regular Chapter 7 bankruptcy “does not discharge an individual debtor from any debt… for death or personal injury caused by the debtor’s operation of a motor vehicle… if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.” Section 523(a)(9) of the U.S. Bankruptcy Code.
This applies just as much to Chapter 13 “adjustment of debts” because it incorporates the same language. Section 1328(a)(2) of Bankruptcy Code.
3 Practical Twists
1) Only Applies to Unlawful Operation
Notice that this exception only applies if your alleged intoxication made your “operation of a motor vehicle… unlawful.” So this raises some questions if you were arguably intoxicated but weren’t so charged. Your bankruptcy lawyer could argue your operation of your vehicle was not “unlawful.” So the resulting accident claims should be written off in bankruptcy.
On the other hand, there may be circumstances in which a person isn’t charged but was still intoxicated under the law. The accident may have happened in an isolated place and the police didn’t arrive until hours later. Even if you weren’t cited, the injured party could still try to bring evidence that you were driving unlawfully. For example, there could be convincing evidence based on how much you drank and when.
2) Property Damage
The Bankruptcy Code language that creates this exception to discharge refers only to debts “for death or personal injury.” This language does not cover property damage. So can you discharge property damage debts from an intoxicated accident?
Maybe. But there is another exception to discharge that does apply to property damages. Bankruptcy law excludes from discharge any debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” Section 523(a)(6) of the Bankruptcy Code.
But if you have an accident while intoxicated the injuries caused weren’t intentional. So they weren’t willful, right?
It may depend on your specific facts, and especially on how the bankruptcy courts interpret the law locally. Bankruptcy is federal law but on close questions could be applied differently in different regions of the country. If you have any debts from any accident make sure you have a particularly experienced bankruptcy lawyer representing you. He or she will advise you about the law in your bankruptcy court.
3) Boating and Flying Accidents
We’ve been discussing driving while intoxicated but the discharge exception also applies to intoxicated boating and flying.
Bankruptcy does not “discharge an individual debtor from any debt. .. for death or personal injury caused by the debtor’s operation of a… vessel, or aircraft… if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.”
Boating and flying are covered by completely different laws, so what’s unlawful is completely different. In state boating laws the blood alcohol concentration amounts may be different, as well of the effect of the operator’s age. Under federal aviation law it is illegal to operate an aircraft:
- “within 8 hours after the consumption of any alcoholic beverage”
- with “an alcohol concentration of 0.04% or or greater in a blood or breath specimen”
- “while using any drug that affects the person’s faculties in any way contrary to safety”