I recently wrote about how debtors can discharge traffic tickets in New York bankruptcy, but in certain circumstances filing bankruptcy can even help debtors reinstate their driver’s licenses if they’ve been suspended. Here’s how.
Unpaid civil judgments. If a debtor owes a judgment obtained in small claims court for more than $1,000 based on the debtor’s ownership or operation of a motor vehicle, then the judgment creditor can attempt to enforce the judgment by asking the Department of Motor Vehicles to suspend the debtor’s vehicle registration or driver’s license. In cases like this the debtor might not have automobile insurance anymore because the state requires it for vehicle registration, and most insurance plans would cover damage to the judgment creditor’s property. (The state might suspend the debtor’s driver’s license for operating a vehicle without insurance, but perhaps the debtor was able to restore it.) Alternatively, the debtor’s insurance might not cover whatever damage the judgment creditor claims the debtor is responsible for.
If the debtor files bankruptcy, then the judgment is just an unsecured claim that will probably be discharged—so long as it wasn’t due to an act committed intentionally or while intoxicated. After the discharge, the Bankruptcy Code prevents the state from discriminating against debtors regarding public licenses on account of debtors’ bankruptcies. In fact the U.S. Supreme Court decided a case with these circumstances in favor of a debtor in 1971, Perez v. Campbell. Consequently, a debtor would be able to reapply for reinstating the driver’s license on account of the judgment.
Unpaid Traffic tickets. I referred to this topic at the beginning of the post, but it’s relevant here too. The DMV can suspend a debtor’s driver’s license if the debtor didn’t pay traffic tickets. Debtors can’t discharge such debts in chapter 7 because they’re owed to governmental entities. However debtors who file in chapter 13 get a break. The Bankruptcy Code doesn’t allow debtors to discharge debts for criminal fines, but New York law doesn’t treat traffic tickets as criminal fines. Instead those are just civil penalties, so they can be discharged in chapter 13.
Bankruptcy is probably not the first choice for clearing the way to getting a driver’s license reinstated, but it might be necessary or a convenient side benefit of filing. The most important aspect to these two examples is that there is a debt to be discharged. Nondischargeable claims, like personal injuries caused by drunk driving are not going to enable debtors to restore their licenses. Moreover, if the suspension is unrelated to a debt, e.g. the debtor failed to file a motor vehicle accident report, then there’s nothing bankruptcy can do. On the other hand, in some states the connection is more straightforward, like when a state allows the government to suspend a debtor’s license after he or she has been liable for damage caused by an accident while uninsured and hasn’t paid the judgment.
For the DMV’s information on suspensions and revocations, click here.
If you owe a debt that’s blocking you from restoring your driver’s license, talking to a New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
