In a bankruptcy action, a debtor asks the bankruptcy court to grant relief from certain debts and protection from lawsuits concerning the collection of these debts. Debts arising from certain types of lawsuits cannot be discharged in some cases, including punitive damages, but all debt must be listed on the bankruptcy filing with the court. Ultimately, the bankruptcy court will decide if any damages are dischargeable.
Damages that are personal injury related and caused by a debtor's drunk driving are not dischargeable. These types of debts are specifically listed in the bankruptcy code. These debts do not have to be granted by a judgment, but can be due to an agreement between the people involved. Debts arising from property damage is not specifically included. Punitive damages that a judge awards from a drunk driving accident that caused personal injury would not be dischargeable unless a bankruptcy court judge ruled otherwise.
Willful and Malicious Injuries
Federal bankruptcy law also excludes debts for willful and malicious damages to people and property from bankruptcy discharge. Conceivably, this could also include property damage from drunk driving if a court ruled that it was malicious. If a court ordered punitive damages due to a willful or malicious act, these damages would also be considered non-dischargable. Because the judge makes the final decision, a debtor should list the debt and ask a judge to make a determination.
Fraud or Malicious Actions
The federal government allows a bankruptcy discharge to let an honest debtor receive a discharge of debts under federal law. It is not intended for people to receive a discharge if they have committed fraud, either in the bankruptcy filing or otherwise. Punitive damages in a lawsuit arising from fraud would not be dischargeable as well. A debt is not presumed to be fraudulent, and the creditor must ask the bankruptcy court to determine that the debt is non-dischargable. If a creditor does not ask this, the debt will be discharged.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows a more liberal discharge of some of the debt that a Chapter 7 bankruptcy will not. Debts arising from willful and malicious acts can be discharged in a Chapter 13 bankruptcy, including punitive damages arising from the actions. In exchange for a discharge in a Chapter 13, the debtor must complete a court ordered re-payment plan, which usually lasts for five years. Some of the debt may be paid off within that plan, but any left over at the end of the plan would be discharged. Sometimes, a debtor can receive a discharge in a Chapter 13 if the court finds that a hardship has occurred that is beyond the control of the debtor. Again, the court will make a final decision on any debt discharge.