Bankruptcy Law Blog

Sunday, July 31, 2016

Don’t Try This at Home

A bizarre bankruptcy case from up near Birmingham has created a new rule: if you crash your car while drunk driving, your car loan can be forgiven when you file for bankruptcy.

Before we explain any further, let us be clear, drunk driving is not something we are encouraging. This is just a weird case that we thought it would be interesting to share.

Debt Dismissed Because Driver Was Drunk

The facts of the case are kind of sad. The guy in the case has been diagnosed with depression, and admits he became an alcoholic after suffering an injury that resulted in an honorable discharge from the military. He had trouble finding a civilian job, and when he did, he suffered an industrial accident that required 3 surgeries. Shortly before the accident that is at the center of this case, his fiancée left him and his father died. On the night of the accident, he bought a fifth of Jägermeister, went home, and started drinking because he “didn't want to feel anything.” The next thing he remembers is waking up in the hospital.

The accident he caused totaled what he and his mother testified was his “dream car,” a 2013 limited edition Scion. Because he had been drinking, his insurance wouldn’t pay out, so his financer was stuck with a $13,840.83 unpaid debt when he filed for bankruptcy.

There is a provision in the bankruptcy code that says debts caused by “willful and malicious injury by the debtor” will not be wiped out, and the financer argued that this provision should apply to the car debt.

The court ruled that unlike other debts caused by drunk driving (like healthcare debt and lawsuit debt), the car debt was still dischargeable (meaning it will be wiped out and the financer will get very little if anything in repayment) because the debtor did not “willfully” injure his “dream car” since he was drunk.

Drunk Driving NOT a Good Way to Clear Away Debts

There are no lessons to take away from this case other than this: drunk driving is bad. We are in no way saying that crashing your car while drunk driving is a good way to get rid of car debt. In fact, if you go out drunk driving and intend to crash, the court would probably determine it was a willful injury and you would be stuck with the debt even after going through bankruptcy.

What Happens if You Don’t Total Your Vehicle While Drunk Driving?

So, what happens to your car debt when you go through bankruptcy under normal circumstances? The answer is, it depends. The Bankruptcy courts understand that people need a way to get around, so they typically work with the creditor to figure out a payment plan that allows you to keep your car. Some debt might get wiped away, and some might be paid off.

However, if you have a driveway full of flashy cars that you blew a bunch of money on just for fun, the court is probably going to repossess those cars to pay off debt. They might leave you with one vehicle so you have a way to get around, or they might work out something where you can get a less fancy car to get around in. What happens in these cases really depends on the individual facts in the case.

If you have questions about what will happen to your vehicles, or any other assets, if you file for bankruptcy, you should talk with an experienced bankruptcy attorney.

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