Last updated Nov. 30, 2018.
Filing for bankruptcy lets you start over with a clean financial slate. Debt collectors’ and creditors’ phone calls, lawsuits, foreclosures, and repossessions stop when you file, and the court steps between you and your creditors.
The biggest benefit of filing for bankruptcy is that your debts are legally wiped out. Whether you file under Chapter 7 or Chapter 13, almost all of your remaining unsecured debt will be discharged at the end of the process. Your medical debts, credit card debt, and bank loans can all disappear.
That’s a terrific deal and a powerful financial tool, but it’s not available for every type of debt. In fact, some debts have been specifically excluded from the discharge because Congress decided people shouldn’t be able to escape them by filing for bankruptcy. One such type of non-dischargeable debt is debt for personal injuries caused by drunk driving.
What is a discharge?
The bankruptcy discharge is a court order that legally wipes out all of the debts included in the bankruptcy that are eligible for discharge. Your creditors are mailed notice that you’ve been through bankruptcy, and they’re prohibited from attempting to collect from you.
That means that they must stop calling you to try to collect the debts, can’t file lawsuits against you to get you to pay, and can’t undertake any other collection activities. If a debt collector violates the discharge, you can ask the court to punish it for doing so.
What types of debt are discharged in bankruptcy?
In general, the bankruptcy discharge applies to your unsecured debts. Unsecured debts are those debts that are not “secured” by a lien in property. For example, all the following are examples of unsecured debt:
- Credit card debt
- Medical debt
- Personal loans from the bank
- Payday loans
- Personal injury judgments
- Outstanding utility bills
In contrast to unsecured debt, your secured creditors go on as usual. Secured creditors have some kind of security interest in your property to secure the debt you owe them. If you fail to repay the debt, they can foreclose on that interest and take possession of that property. Home mortgages and auto loans are two common examples of secured debt.
With secured debt, you do have the option of surrendering the property and getting out from under any deficiency. But secured debts don’t get discharged.. You either pay them or you lose the property that secures the debt.
Debt owed for personal injury caused by drunk driving
Despite the general rule, several types of unsecured debts are not dischargeable in bankruptcy. The law gives repayment of these amounts a higher priority than the financial situation of the debtor. For example, student loans are generally not dischargeable.
Another type of debt you won’t be able to shake through bankruptcy is debt you owe for personal injury you caused while driving under the influence. Drunk driving is a serious problem and Congress wants to ensure that its victims are paid what they are owed. Section 523(a)(9) of the United States Bankruptcy Code specifically excludes debts incurred while driving under the influence from discharge under either Chapter 7 or Chapter 13 bankruptcy.
You’re stuck with judgment debt you incurred for driving under the influence of any substance, not just alcohol. (And yes, that includes medical marijuana that you legally possess under Ohio’s new medical marijuana laws.) That judgment debt also becomes priority debt, meaning it’s repaid before debts you owe to other creditors.
This exclusion applies to judgments owed for personal injury or death only; judgment debt for property damage may still be discharged through bankruptcy. The exclusion only applies to judgment debt incurred while you were driving; if a third party was driving you may still be able to discharge any judgment debt associated with the incident.
Will my debt be discharged?
Judgment debts for personal injury caused by driving under the influence are generally not dischargeable in bankruptcy. If your biggest financial problem is such a judgment debt, bankruptcy may not be the best way for you to deal with it. You may want to consider alternatives, such as negotiating a lower settlement amount or agreeing to make payments over time to pay off the judgment.
An Ohio lawyer can help you determine the best approach to dealing with such judgment debts.
If you’re struggling with debt in general and think bankruptcy might help you, speak to an experienced Ohio bankruptcy attorney. Explain that you owe a judgment debt for personal injury you caused while driving under the influence. You attorney will be able to help you determine if bankruptcy is the best course for you and can help you deal with the judgment debt outside of bankruptcy.
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