When a Chapter 7 bankruptcy case is filed, it is normal to expect that all unpaid unsecured debts will be discharged. Debtors who file Chapter 7 cases may include for discharge not only credit cards and medical bills, but also judgments.
All judgments, however, may not be discharged in a case. Any judgment related to a debtor’s driving under the influence likely will not be discharged in a chapter 7 case.
What happens to the DUI judgment once a Chapter 7 bankruptcy petition is filed?
What Is a Chapter 7 Bankruptcy?
Two different forms of bankruptcy cases are commonly used by consumers to help them out of difficult financial situations: Chapter 7 and Chapter 13 bankruptcies.
Chapter 7 bankruptcy is otherwise known as a “liquidation” form of bankruptcy. Once a petition is filed, an automatic stay (“injunction”) is issued that prevents actions by creditors to collect on debts owed to them.
The debts that normally are discharged are those that we consider to be “unsecured.” That is, the creditor does not have a lien on any of debtor’s assets to secure payment of the debt.
Creditors may file an objection to having their debt discharged at the end of the case. Objections to discharge are not common but should be expected if the creditor has a DUI judgment.
What Debts Can Be Discharged in Chapter 7 Bankruptcy?
While discharge of debts is normally the end result following a Chapter 7 bankruptcy filing, not all debts can be discharged in a Chapter 7 bankruptcy proceeding. Many debts, in fact, are not dischargeable as a matter of good public policy.
The debts that are considered non-dischargeable include:
- Student loans (in most circumstances)
- Property tax debts
- Taxes withheld from an employee’s wages
- Pension or retirement loans
Most debts from lawsuit judgements can be discharged in bankruptcy. However, there are certain judgements that are non-dischargable obligations.
Such non-dischargeable obligations include:
- Debts from death or personal injury claims resulting from DUI cases
- Debt obtained illegally either through fraud or deception
- Debts from willful or malicious injury perpetrated by the debtor
- Criminal fines, penalties, and restitution
- Child support and alimony
DUI Injury Judgment
When someone faces a DUI matter, they may not only be held responsible criminally but also civilly. Many times, a civil law suit is filed after a car accident caused by a person driving under the influence of alcohol or drugs.
The purpose of these law suits is to punish the intoxicated driver, to obtain a judgment that hopefully prevents this type of action from happening again, and one that hopefully compensates and makes the injured party “whole” again.
If damages are awarded in a DUI case, the judgment will not be dischargeable in a Chapter 7 case. Other criminal DUI fines and penalties may be discharged, but normally, a DUI injury judgment is held sacred and protected from discharged.
Protecting A DUI Injury Judgment
Is a DUI injury judgment automatically protected in a Chapter 7 case? The answer to this question depends largely on the bankruptcy court. While many DUI judgments are automatically protected, a DUI injury judgment may not be protected without specific action by the creditor in the bankruptcy case.
Under the Bankruptcy Code (11 U.S.C. §523(a)(9)), a DUI injury debt is not automatically not dischargeable. To put it another way, the creditor who is owed the judgment needs to be alert and will need to file an objection to the discharge of that debt before the deadline for filing the action.
Obtaining The Money
A problem arises however, when someone who is facing bankruptcy is also facing a judgment for money from a DUI injury. It is like the old saying “you cannot get blood from a turnip.”
If the debtor is in such a poor financial situation that he or she is seeking a bankruptcy to get him or herself out of debt, the injured party (“creditor”) may have a tough time actually receiving payment from the debtor.
Wage Garnishment
The best way to proceed to fully ensure that the injured individual is paid is to file a notice of the of the judgment in the public records. In some states, liens can be placed on the nonexempt property of the debtor.
A settlement with the debtor could also be negotiated. A bankruptcy attorney will be able to advise the debtor on how best to handle this situation and to advise the creditor on how to ensure that the DUI judgment is protected and paid.
An experienced Texas bankruptcy lawyer can help a debtor determine which debts are not dischargeable and/or prevent discharge of DUI judgments. Call the Law Office of Marilyn D. Garner today at 817.381.9292 for a free consultation to discuss how bankruptcy may help you.