CAN I WRITE OFF CLAIMS AGAINST ME FROM A VEHICLE ACCIDENT?
When you think of debts to be written off through bankruptcy, you likely think of credit cards, medical bills, vehicle loans, and such—debts of definite amounts of money you owe on obligations that you’d voluntarily incurred. But debts can be based on other more ambiguous obligations, such as claims against you from a vehicle accident.
If you are in an accident in which someone else is injured and you are found to be at least partially at fault, various kinds of claims could be made against you. You could be responsible for paying the injured person’s already accrued medical bills, future medical bills, and loss of income while the person can’t work. You could be responsible for paying to repair or replace the vehicle(s) of the other driver(s). If you don’t have insurance or if the amount of coverage isn’t enough to cover the claims against you, you would have to personally pay those claims once you were found at fault for the accident. Those claims could amount to tens of thousands or even hundreds of thousands of dollars.
You can usually discharge (legally write off) those claims against you by filing bankruptcy.
HOW CAN A DEBT ON A CLAIM BE DISCHARGED WHEN THE AMOUNT OWED ISN’T YET KNOWN?
The federal Bankruptcy Code defines a “debt” as “liability on a claim.” What’s a “claim”? It’s a “right to payment, whether or not . . . liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed . . . .” See Section 101(12) and Section 101(5) of the Bankruptcy Code.
So when bankruptcy discharges “all debts . . . and any liability on a claim,” it doesn’t matter if the amount of that debt or claim is unknown, or “unliquidated.” As long as the accident happened before the bankruptcy was filed, “any liability on a claim” is discharged.
For example, if someone was injured in a vehicle accident for which you were at least partly responsible, the injured person’s claim for medical expenses and lost wages would generally be discharged in a bankruptcy filed at any time after the accident. Not knowing the amount of those medical expenses and lost wages does not stop you from discharging the entire claim.
ARE THERE ANY EXCEPTIONS TO THE DISCHARGE OF CLAIMS RELATED TO VEHICLE ACCIDENTS?
Yes, one big exception is for debts or claims arising from a person’s driving under the influence of alcohol or other intoxicants.
More precisely, the Bankruptcy Code “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).
So if someone is injured or killed in a vehicle accident caused by your illegal driving under the influence of an intoxicant, you cannot discharge the debts related to that injury or death.
DOES THIS APPLY TO BOTH CHAPTER 7 “STRAIGHT BANKRUPTCY” AND CHAPTER 13 “ADUSTMENT OF DEBTS”?
Yes. There are a few kinds of debts that can’t be discharged in a Chapter 7 case but can be in a Chapter 13 one. Under Chapter 13 certain debts are discharged after you pay as much as you can afford to pay to all of your creditors during a 3 to 5 year period of time. After that the remaining portion of some categories of debts are discharged.
But DUI debts are not among those that can be discharged only under Chapter 13. The Bankruptcy Code makes that clear. Section 1328(a)(2) specifically incorporates this driving-under-the-influence exception (the Section 523(a)(9) referenced above) into Chapter 13 cases.
WHAT IF YOU ARE NOT CITED FOR DRIVING WHILE INTOXICATED BUT YOU DID HAVE SOMETHING TO DRINK/INGEST?
This exception to discharging accident-related debt applies only if your “operation of a motor vehicle was unlawful” because of your intoxication. If you’ve ingested an intoxicant and were in an accident but were not charged with driving under the influence, you would likely be able to discharge debts arising from the accident.
But it is possible that you were driving unlawfully even if you were not cited for doing so. For example, the accident could have occurred in a remote place so that the police could not check your blood alcohol content until long afterwards. But in a lawsuit by the injured party evidence could still be presented showing that you were driving unlawfully, such as facts about how much you had to drink and when. So be cautious about the risks even if you weren’t cited by the police. Discuss this thoroughly with your bankruptcy attorney.
WHAT IF YOU ARE CITED FOR A DUI BUT NOT CONVICTED?
There are about 200,000 DUI arrests every year in California, including both felony and misdemeanor arrests. About 3/4ths of these result in a DUI conviction, so about 1/4th do not. See California DUI Fact Sheet.
If you’re cited for a DUI offense but then are in this minority of cases in which you avoided being convicted, then you may be able to make a successful argument that your “operation of a motor vehicle” was NOT “unlawful.”
But again, you need to be cautious about this. The standard of proof for a criminal offense is significantly higher than in the civil courts. It may be possible for someone injured in the accident to establish “by a preponderance of the evidence” that you were driving unlawfully as a result of your impairment even though in your criminal case there wasn’t quite enough evidence to show that “beyond reasonable doubt.” The injured person could win under the “preponderance of the evidence” standard simply by showing that there is more evidence that you were driving unlawfully than evidence that you were not, even by the smallest degree.
As a practical example, your DUI attorney may have been able to avoid a DUI conviction for you by plea bargaining to a lesser offense. Indeed, that would probably be a wise tactic for the very purpose of trying to avoid this DUI exception to getting a bankruptcy discharge. But just because the assistant district attorney chose not to try to convict you on the DUI charge for the lack of evidence “beyond a reasonable doubt” does not necessarily mean that the attorney for an injured party wouldn’t be able to show “by a preponderance of the evidence” that you were driving unlawfully under the DUI laws.
HOW ABOUT DEBTS FROM PROPERTY DAMAGE?
The Bankruptcy Code section I keep referring to speaks only of debts from “death or personal injury,” not about those from property damages. Property damage would generally refer to the cost of repairing or replacing the other driver’s vehicle. But it could also apply to governmental property such as road signs and barriers, and to private property struck during an accident. The damages usually are not as much as from personal injuries but can still be surprisingly large.
In general debts that are not excluded from discharge in the Code are discharged in bankruptcy. So at first glance it would seem that the property damage debts could be discharged in drunk driving accidents.
But there’s another exception to discharge that does apply to property damages. Section 523(a)(6) excludes from discharge any debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” Does causing an accident while driving impaired constitute a “willful and malicious injury”? Is property damage from drunk driving a “willful and malicious injury” if you intentionally drove while impaired but certainly did not intend to have an accident or to cause any property damage?
In California the answer appears to be “yes.” The Ninth Circuit Court of Appeals, the federal appeals court that covers the far western part of the country including California, has directly ruled on this issue. In a case called In re Adams the court held
that the voluntary acts of drinking and driving while intoxicated constitute conduct sufficiently intentional to support a finding of willfulness and malice, as contemplated by section 523(a)(6) . . . . Therefore, debts arising from liabilities which are incurred as a result of drunk driving . . . are nondischargeable.
As a result any liability related to property damage caused while driving while impaired cannot be discharged in bankruptcy.
BEYOND DWI, HOW ABOUT BWI OR FWI?
BWI is boating while intoxicated. FWI is flying while intoxicated. This same exception to discharge applies to them, too.
The Bankruptcy Code section we keep referring to, Section 523(a)(9), includes both drunk boating and flying as well : 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.” Although “vessel” and “aircraft” are not defined in the Bankruptcy Code itself, it clearly refers to boating and flying while unlawfully intoxicated.
Boating law in California can be confusing, since unlike with motor vehicles it’s perfectly legal to operate a boat while the occupants drink alcohol or other legal intoxicants. However, it IS illegal for a person under the influence of alcohol or other intoxicants to operate a boat. As with motor vehicles, boat operators can be required to take a blood or breath test, with a blood alcohol concentration of 0.08% presuming intoxication. For those under 21, the blood alcohol concentration threshold is much lower, 0.01%. Importantly, a drunk boating conviction can lead to a motor vehicle license suspension. See the California Department of Boating and Waterways’ brochure, Facts about Boating and Alcohol, a Deadly Mix.
Drunk flying laws are even stricter, as to be expected. Under federal law it is illegal to operate an aircraft 1) “within 8 hours after the consumption of any alcoholic beverage,” 2) with a blood alcohol concentration of 0.04% or more, and 3) while under the influence of alcohol or any drug “that affects the person’s faculties in any way contrary to safety.” See the Code of Federal Regulations, Title 14, Section 91.17 See also California Public Utilities Code Section 21407.1. Given the obviously greater risks, death is more likely and injuries and property damage are more likely severe from flying accidents. And the debts from them all can’t be discharged in bankruptcy if the accident resulted from operating the aircraft under any of the above conditions of impairment.
Every year there are about 2,000 alcohol- and drug-related vehicle accident fatalities in California. There are about 30,000 injuries. See California DUI Fact Sheet.
These are obvious reasons, among many others, not to drink and drive (or boat or fly). It may help just a bit to know that there is one other self-serving reason not to: that if you do operate any of these modes of transportation while unlawfully intoxicated you can’t discharge any of the resulting death/personal injury debts in bankruptcy, and likely none of the resulting property damage debts either. You might consider passing this onto your friends and family at the opportune time, to help persuade them to avoid dangerous behavior as well.