Afraid you may get a judgment for a personal injury, only to have the defendant file bankruptcy and leave you with nothing? In the words of Lee Corso; "Not So Fast My Friend."
While most injury claims are covered and paid for by the wrong-doer's insurance policy, insurance does not always cover all claims. In these situations a judgment can be obtained against the individual who is held financially responsible out of their own assets. While some judgments are certainly dischargeable in bankruptcy, others are not. Two specific types of judgments which can overlap with our criminal defense or personal injury cases that are not dischargeable in bankruptcy are "intentional torts" and injuries caused by drunk driving.
Some personal injury claims and judgments are not dischargeable in any type of bankruptcy proceeding if the injury is the result of an intentional tort. An intentional tort is a wrongful act committed on purpose, not merely negligently, with the intent of causing physical, mental or financial harm to another person. These types of judgments often include injuries sustained in an assault, sexual assault, libel or slander, malicious prosecution, and other similar intentional wrongful acts, specifically intended to do harm to another person.
Most automobile related personal injury claims or judgments are due to negligent offenses (accidental conduct). However if the cause of the accident is due to the driver being intoxicated from alcohol or other drugs, the debt arising from that accident for personal injury is non dischargeable, meaning it won't go away if you file bankruptcy. 11 U.S.C. §523(a)(9) provides that a debt will not be discharged "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." It's also important to note that other fines, penalties, and restitution orders associated with a conviction of any crime (even traffic tickets) are non-dischargeable in bankruptcy.
A person suffering under the weight of a judgment resulting from a personal injury caused by an intentional tort or drunken driving may have an alternative financial shelter by way of a chapter 13 bankruptcy filing. This provision does not discharge the debt but provides for an often-times more practical payment plan. Under chapter 13 bankruptcy provisions the debt will not be discharged, but can be transformed into a priority unsecured debt which may be repaid in full at 0% interest over the course of a 5 year plan under 11 USC §507(a)(10). Five years or sixty months is the maximum amount of time the court will allow a person to repay this debt so the planned payments in the chapter 13 must be sufficient to repay at least the full amount of this debt (plus some administrative fees and any other priority debts). Otherwise, the chapter 13 plan will not be feasible and the court will not confirm the plan, resulting in the chapter 13 bankruptcy being dismissed.
GRL Law would like to thank Deanna Bachman for this guest blog. Deanna is the owner of Bachman Law P.C., a West Des Moines law firm, specializing in bankruptcy and debt relief. For more information on Iowa bankruptcy and debt relief options log onto www.bachmanlawpc.com.
