How are Parking Tickets and Driver Responsibility Fees Handled in a Michigan Bankruptcy? By Managing Attorney Christopher Jones
The issue of how parking tickets and driver responsibility fees (DRF) are treated in bankruptcy is an often discussed topic within bankruptcy circles and there are several variables to consider. It is hotly debated because there is not a bankruptcy court ruling interpreting the exact nature of the driver's responsibility fees (DRF) in relation to the bankruptcy code.
Driver Responsibility Fees and Filing Chapter 7 Bankruptcy in Michigan
In considering whether bankruptcy can provide relief to an individual facing DRF's as an impediment to getting their license restored, both the legal and practical factors need to be considered. From a legal standpoint, 11 United States Code 523(a)(7) renders non-dischargeable (i.e., cannot eliminate with Chapter 7) any debt that is for "a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit." There are several arguments on both sides as to whether the DRF falls into this category. Again, there isn't a bankruptcy case on point construing Michigan's DRF statute. However, Texas and New Jersey both have analogous DRF statutes and bankruptcy courts in both jurisdictions have determined that DRF's do fall within the scope of 11 USC 523(a)(7) and the debts cannot be discharged under Chapter 7. From a practical standpoint, we have found that the State of Michigan has not contested the dischargeability of the DRF's and clients are able to restore their licenses following their bankruptcy discharge.
Traffic Tickets Fees and Filing Chapter 7 Bankruptcy in Michigan
Traffic tickets are less predictable. Although fines/penalties associated with traffic tickets fall squarely within 11 United States Code 523(a)(7) and are not dischargeable, various municipalities/courts deal with the bankruptcy discharge differently. Despite the right of the municipality to continue to collect the fines following the bankruptcy discharge (and impede the restoration of driving privileges), many municipalities/courts will treat the fines as resolved/satisfied/discharged when included in a Chapter 7.
Consider Chapter 13 Bankruptcy
Another option is to file a Chapter 13 debt consolidation plan. A Chapter 13 bankruptcy usually involves some nominal repayment to creditors (0 - 5% in many cases) over a period of time (usually 36 months). 11 United States Code 523(a)(7) does not apply to Chapter 13 discharges. Therefore, both DRF's and traffic tickets/fines/penalties are dischargeable in Chapter 13 and will provide relief to an individual who has no other option to restore their driving privileges. Another big benefit of Chapter 13 as compared to Chapter 7 is that a client does not typically have to pay any attorney fees to file a case (they only pay a court filing fee, currently $281.00) which enables them to gain the protection and benefit immediately as the attorney fees in Chapter 13 are included in the repayment plan. In Chapter 7, attorney fees must be paid before a case can be filed with the court which can create a hardship in many cases.
Call for a Free Consultation
Every set of circumstances is unique and we take the time at your free consultation to review and discuss all of your available debt resolution options. Call today at 866-261-8282 to speak with a licensed Michigan bankruptcy attorney. Debt resolution is all that we do and with over 50 years of combined legal experience, we are qualified and ready to work for you!