Can I Discharge a Personal Injury Judgment in Bankruptcy?

By John Hilla, Michigan Bankruptcy Attorney

On Purpose or While Intoxicated—Or Neither?

A personal injury judgment is as dischargeable as any other unsecured debt, such as credit card or medical debt, so long as the judgment against you wasn’t for an “intentional tort” or for death or personal injury caused by your intoxication.

That is, if the judgment is based in an allegation of mere negligence, as is commonly the case with automobile, slip-and-fall, dog-bite, and other typical personal injury judgments, the judgment will be able to be fully discharged in either a Chapter 7 or Chapter 13 bankruptcy.

Non-Dischargeability for Intentional Torts

So what is an “intentional tort?” A tort is the name of an action one person may take which may allow another person some level of legal remedy against them under civil law. It is the part of the US legal system from which nearly all legal actions which are not criminal claims or breach of contract claims arise. The commission of a tort by one person against you would be the basis for a lawsuit you might file against them in civil court for which you might claim money or other damages as a remedy.

All personal injury lawsuits are lawsuits based upon the commission of a tort, or tortious act. The first question with regard to dischargeability in bankruptcy of a judgment received after the filing of a personal injury lawsuit is, “Was this an intentional tort?

An intentional tort is an act you committed on purpose, not by accident.

The vast majority of personal injury lawsuits are based on negligence or other non-intentional torts. You didn’t mean to let your dog get out of the yard and bite that guy, but you didn’t adequately lock your gate or post any warning signs. You were negligent in keeping a dog that might be prone to biting somebody … You didn’t mean to drive your car into that lady’s swimming pool, where she just 523to be floating in an inner tube. You were negligent in the operation of your vehicle.

Those sorts of negligent, non-intentional torts are dischargeable in bankruptcy.

An intentional tort is something you intended to do to someone else, actually did, and which caused damage: assault, battery, false imprisonment, and others. If you punch somebody in the face, and they end up with their jaw wired shut for a year, destroying their up-and-coming career as a nose model for sinus medication advertisements, you will be the proud owner of a judgment for an intentional tort if they sue you and win.

That judgment will not be dischargeable in bankruptcy.

Non-Dischargeability for Death or Injury Arising from Intoxication

Additionally, a personal injury judgment for injury or death which occurred because you were intoxicated from the use of alcohol or some other drug will also not be dischargeable in bankruptcy, regardless of whether you intended to be drunk or intended to cause damage while drunk or intoxicated.

This is because Section 523(a)(9) of the US Bankruptcy Code (the Federal statute governing the bankruptcy process in the US) says this is the case. This Section of the Code makes it clear that a debt originating from “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 not dischargeable.

Chapter 13 Bankruptcy Can Help Even if the Debt Is Non-Dischargeable

Even if your personal injury judgment is not dischargeable in bankruptcy, you can still receive assistance from the bankruptcy process in dealing with it. A Chapter 13 “payment plan” or “reorganization” bankruptcy will allow you to repay the debt in full at 0% interest over 3-5 years.

Chapter 13 bankruptcy is, essentially, a payment plan in which you repay to your creditors what you can afford to repay over 36-60 months, after your necessary household expenses are taken into account. Debts that are dischargeable, such as credit card debt, receive whatever you are able to pay into the plan over that time-period, and then the unpaid balance is totally discharged just as it would be in a Chapter 7 bankruptcy.

Non-dischargeable debts must be paid 100% of what the creditors holding those debts are owed, in contrast. Thus, while your credit card creditors may only be paid 0.5% of what you owe them by the end of the plan, a non-dischargeable personal injury creditor will be paid 100% of what you owe—and in priority over the dischargeable creditors.

A Chapter 13 can be of great assistance in forcing even a creditor holding a non-dischargeable claim to accept a reasonable monthly payment that still allows you to keep food on your table.

Can You Discharge a Personal Injury Judgment in Bankruptcy? The Bottom-Line

The bottom-line is that, if you are being sued for a personal injury, particularly if the suit is for an amount of money above your insurance limits or if you had no insurance if there is an auto or homeowners insurance claim involved, you should contact an experienced bankruptcy attorney immediately to explore your options.

Trustee Motion to Dismiss in Chapter 13: How to Handle It

Trustee Motion to Dismiss in Chapter 13: How to Handle It

By Peter Bricks

In a lot of Chapter 13 cases I handle as an Atlanta bankruptcy attorney, my clients get served with a motion to dismiss their case by the trustee. My clients normally panic when they see the motion, but a lot of times the initial stress is unwarranted and the issue resolves itself.

A trustee usually files a motion to dismiss because the debtor is behind on plan payments, or there is something structurally wrong with the case. Although not always the case, dismissal motions related to technical defects will usually come pre-confirmation. That is because these defects are raised by the trustee right after the meeting of creditors and need to be corrected to get the case confirmed.

Therefore, it is less likely that a technical problem would occur post confirmation. That being said, these problems certainly do happen. Examples will vary be district, but can include- the debtor not turning over a post-petition tax refund or inheritance, a late filed creditor claim that alters the amount the debtor must repay in his plan, or undisclosed change in circumstances to the debtor’s income.

Should the debtor not be current in the plan payments, the debtor can expect a motion to dismiss soon thereafter. The timing will vary be district, but a Northern District of Georgia bankruptcy lawyer usually sees these after 2-3 missed trustee payments.

Not surprisingly, delinquent payment problems are solved by making payments. Therefore, if you get a motion to dismiss for lack of funding, immediately get with your attorney to negotiate a resolution with your trustee. A motion to dismiss is usually set for a hearing about 3-4 weeks after it is filed, so the debtor will get an opportunity to object and cure the problem.

Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys. He has bankruptcy attorney offices in Dunwoody, Woodstock, Cumming and Jonesboro, Georgia.

Wage Order in a Chapter 13 Bankruptcy

What is a wage order and what are the benefits?

A wage order in a Chapter 13 is where a portion of your Chapter 13 plan payment is automatically deducted from your paycheck by your employer. Your employer then sends the money directly to the trustee.

If you are paid bi-weekly then the monthly payment will be prorated. For example, if your Chapter 13 plan payment is $300 then $138.46 would be taken out of each paycheck.

Benefits to wage order:

· Presumed current if less than 10 days late

· No paying entire payment out of one paycheck

· Payments guaranteed to be made (so long as your employer is following the order)

· You are not tempted to spend the money elsewhere

· Allows for an overall successful completion of a Chapter 13 plan

In Illinois, wage orders are required where the Debtor is employed. In Missouri, while it is not required, it is strongly recommended as is ensures payments will be made to the trustee on a regular basis.

What are your payment options if you do not have a wage order?

Payments can be made in the form of a cashier’s check or money order and mailed to the trustee. You can also set up for an official bank check to be sent on a monthly basis directly to the trustee. They will NOT however accept a personal check from you.

To avoid incurring the fees of a money order on a monthly basis for your entire Chapter 13, talk to your attorney about setting up a wage order for you.