Is My Personal Injury Judgment Dischargeable in Bankruptcy? A Question of Intent.
When Is a Personal Injury Judgment Dischargeable in Bankruptcy? When You Didn't Mean to Do It!
Personal injury lawsuit judgments, depending upon the nature of the claim, may not be dischargeable in Chapter 7 or Chapter 13 bankruptcy. A claim or a judgment for an injury that is the result of an "intentional tort" is not dischargeability in bankruptcy. An intentional tort is a civil offense committed with the intent of causing physical, mental, or financial harm to another person. In other words, it is an offense committed on purpose and not through mere negligence. Assault is an example of an intentional tort, whereas automobile-related personal injury judgments are negligent offenses (unless you've purposefully run someone down or crashed your car House-style into an ex-girlfriend's living-room). Use of alcohol, drugs, or other intoxicants party to the commission of the offense leading to the personal injury judgment may also render the judgment non-dischargeable under the US Bankruptcy Code. 11 USC 523(a)(9) states that a debt arising from "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" is non-dischargeable. In other words, if the debt arose from an injury caused by drunk-driving (regardless of the type of vehicle), it is non-dischargeable as well. However, if the judgment arose from an act of negligence that is unrelated to intoxication as a result of the use of alcohol or another drug, the judgment may be discharged. Further, for a judgment to be declared to be non-dischargeable by the Bankruptcy Court, the creditor must file a variety of civil lawsuit called an "adversary proceeding" with the Court within 60 days of the date of filing, or the debt will be discharged.
You Can Always Pay Off a Personal Injury Judgment Not Dischargeable in a Chapter 13 Bankruptcy
However, even if a PI judgment cannot be discharged, it may be repaid in full at 0% interest as a "priority" unsecured debt in a Chapter 13 bankruptcy payment plan. A Chapter 13 bankruptcy allows you to repay your "non-priority" unsecured debts (credit cards, medical debt, etc.) according to your ability to repay the debts after your household expenses are taken into account. Whatever of the non-priority unsecured debts are not repaid at the end of the Chapter 13 bankruptcy is then discharged in full just as they would have been in a Chapter 7 bankruptcy, in which all non-priority and dischargeable debts are discharged in full without anything being repaid. Priority unsecured debts such as recent tax debt, child support arrears, and non-dischargeable personal injury judgment awards, among other things, must be repaid in full by the time the Chapter 13 plan is completed, which is a maximum of 60 months. You will repay the debt---but you get to do it according to your need to keep food on the table, etc., at the same time and, potentially, over 5 years. The presence of "priority" unsecured debts such as a non-dischargeable intentional tort personal injury judgment award is one of the reasons why many people elect to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy, which will not stop or slow very much the collection of a priority, non-dischargeable debt. If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.