DUI and DWI cases are some of the more common criminal offenses.  People who have the bad luck to become involved in drunk driving cases quickly find out that these cases carry with them a significant financial burden.  And at the conclusion of the case, it often happens that there are fines, restitution, or other forms of court-ordered payment that need to be made.  Can these debts be discharged in a bankruptcy filing?

The answers are complex, and provide a good example of the intersection between criminal defense and bankruptcy.  At Phillips & Thomas LLC, we practice in both of these areas and are experienced in dealing with the nuances of bankruptcy and drunk driving cases.

Section 523 of the Bankruptcy Code contains a list of things for which a bankruptcy discharge is not permitted.  One of the subsections is Section 523(a)(9).  It reads:  “A discharge…does not discharge an individual debtor from any debt…(9) 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.”

Note here that this section only applies to “death or personal injury”, not to other damages, such as property damage.  This is important.  The bankruptcy court has the power to determine dischargeability under this section, even if a criminal court has already ruled on the matter.  An adversary proceeding would still need to be filed to determine dischargeability.  Remember, bankruptcy court is a civil court, where the standard of proof is different from the standard of proof in a criminal case.  See In Re Caffey, 248 B.R. 920 (Bnkr. N.D. Ga. 2000). [click on the case for the link].

What about punitive damages?  Punitive damages and dischargeability (or examplary damages) were discussed by the US Supreme Court in Cohen v. De La Cruz, 523 U.S. 213 (1998).  The Court ruled that if a debt was not dischargeable under a subsection of Section 523, then punitive damages associated with it would also not be dischargeable.

But there is more.  Section 523(a)(6) prevents the discharge of debts “caused by willful or malicious injury” to another person.  Negligent or reckless acts generally will not be enough.  The conduct has to be “malicious” within the meaning of bankruptcy case law.   In practice, however, this is not an easy standard for a creditor to meet.

Having litigated many adversary proceedings, I can say that a creditor seeking to recover under this section would have to show a bankruptcy court a very significant level of bad conduct.  “Malice” has a very particular meaning in bankruptcy law under Section 523(a)(6), and the simple fact that someone has been harmed is not enough.  There must be actual intent to injure the victim.

Section 523(a)(13) prevents discharge of debts from payments of restitution orders under federal law from certain types of criminal cases.  The crime involved needs to be a “crime of violence.”  Whether a drunk driving case is considered a “crime of violence” would be up for a judge to decide on a case-by-case basis.  The other problem here is that most DWI cases do not involve federal violations, only state or municipal law.

What type of bankruptcy is filed also makes a difference.  This shows, yet again, the necessity of picking the right type of bankruptcy to file under.  Section 523(a)(6), discussed above, does not apply to Chapter 13 cases (See Section 1328(a)(2)).  Further, a creditor seeking to recover under Sections 523(a)(2), (4), or (6) would need to file an adversary action against the debtor, which most small creditors are unwilling to do.  As another example, section 523(a)(7) discusses nondischargeable government fines.

The exception to discharge under 523(a)(7) does not apply to Chapter 13 cases (see Section 1328(a)(2)).  But Chapter 13 has its own rules on nondischargeability, as we show below.

Although some nondischargeability sections here do not apply to Chapter 13 or Chapter 11 cases, there are other provisions that can be used by creditors to recover under other chapters of the bankruptcy code.  Section 1328(a)(3) and (4) prohibit discharge for debts from fines or restitution in a criminal case.  These sections also prohibit discharge of damages awarded from civil actions against debtors for “willful or malicious” injuries.

When all is said and done, it is possible to discharge debts arising from drunk driving cases, but it is not easy.  The issue will turn on the following factors:

(1) How aggressive is the creditor (victim of a DWI accident, or the government agency bringing the criminal case) in pursuing its rights in bankruptcy court?  Not many private parties or governmental agencies are willing to invest the time and expense to litigate something in bankruptcy court, which for them may be unfamiliar ground.

(2) What chapter is the debtor filing under?  The rules, procedures, and conditions for discharging a drunk driving debt may very well be different in Chapter 7, 13, or 11.  Picking the appropriate chapter can make all the difference.

(3) Can the legal standards be met, under the relevant case law in the 8th Circuit or 10th Circuit (i.e., for Kansas and Missouri)?

Consulting with an attorney who practices in both bankruptcy and criminal defense is a key step in finding out where you stand.

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