Bankruptcy is the legal process by which a debtor can eliminate some or all of his debt. The two main types of consumer bankruptcy, Chapter 7 and Chapter 13, each deal with debts in a different way. Chapter 13 is a way to pay back debtors over time, without losing any property. Chapter 7 doesn't require payments, but could result in the loss of assets. Each bankruptcy chapter deals with traffic fines differently.
Chapter 7 Discharge
Although a Chapter 7 discharge has the power to eliminate most debts, traffic fines are not included. The U.S. Bankruptcy Code classifies traffic fines in Chapter 7 bankruptcy as non-dischargeable in Section 523(a)(7). Typically, any fine or penalty you owe to a governmental unit is non-dischargeable under this section. Even if the rest of your debts are discharged in Chapter 7, you will have to find a way to pay your traffic tickets.
Chapter 7 Liquidation
If you file Chapter 7 bankruptcy, the trustee has the right to liquidate any of your assets considered "non-exempt" by the court. A non-exempt asset is one that is not protected by a specific bankruptcy exemption in the state where you file. Most states provide at least limited protection for assets such as homes and cars, but if you own any valuable property it may be at risk. For example, if you own $25,000 in jewelry but your state only provides an exemption of $1,000, your trustee will sell your jewelry, return the exempted $1,000 to you and use the remaining $24,000 to pay off your creditors. If you owe traffic fines when you file Chapter 7, at least some of your liquidated property will be used to pay that debt.
Chapter 13 Plan
In Chapter 13, you are expected to pay your disposable income to your creditors on a monthly basis for up to five years. However, you do not necessarily have to pay off the entire amount that you owe. Certain creditors, known as priority creditors, must always be paid in full. However, unsecured creditors, such as credit card companies, only receive what is available after priority creditors receive their payments. In some cases, unsecured creditors receive nothing. It is theoretically possible in some states for very minor traffic offenses to be regarded as unsecured debt. However, generally you will have to pay your traffic fines as part of your Chapter 13 plan.
Regardless of the type of bankruptcy you file, if your traffic fine is the result of a criminal violation, you can never discharge it in bankruptcy. Criminal traffic offenses include hit-and-run, driving while under the influence, reckless driving or eluding the police. In a broader sense, a criminal traffic offense is one that could result in jail time.
- U.S. Courts: Discharge in Bankruptcy
- Nolo: What Bankruptcy Can and Cannot Do
- Michigan Bankruptcy Lawyer: Can I Discharge Traffic Tickets in Bankruptcy?
- Bankruptcy in Brief: Exemptions, What Can I Keep If I File Bankruptcy?
- Bankruptcy in Brief: What Happens to Assets That Have Non-Exempt Equity?
- U.S. Courts: Chapter 7
- Nolo: An Overview of Chapter 13 Bankruptcy
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