Driver’s License Suspension and Bankruptcy

A common reason to file for bankruptcy is to get your driver’s license reinstated by the Washington Department of Licensing. It is important to determine whether a chapter 7 or chapter 13 bankruptcy is your best option when trying to resolve driver’s license issues, and usually the answer is based upon the reason the license is suspended or threatened to be suspended.

Chapter 7 Bankruptcy

If your license is suspended due to not having liability insurance when involved in a motor vehicle collision under the Washington financial responsibility law, under most circumstances your license can be reinstated after a Chapter 7 bankruptcy filing and the debt can be discharged in the bankruptcy as well. The usual situation is that a client was involved in a rear-end or other type of motor vehicle collision and does not have liability insurance. The other driver’s insurance company paid their medical bills or property damage and then threatens to suspend the non-insured driver’s license. Often the debt associated with unpaid medical bills and property damage greatly exceeds their financial means to pay the debt through a payment plan. Sometimes my client’s license has already been suspended under the WA financial responsibilities law before they ever contact me. So long as the only reason that the license is suspended is for violating the financial responsibilities law of no insurance, the Chapter 7 filing should reinstate the driver’s license, usually shortly after the bankruptcy filing. It is needs to be confirmed prior to the bankruptcy filing that the reason that the license is suspended is for not having insurance and is not suspended due to tickets. However, a Chapter 7 bankruptcy does not discharge driving infractions and so if the license suspension is related to unpaid tickets/infractions, the suspension will not be lifted. A chapter 13 bankruptcy is a better option for infractions that are holding your license.

Chapter 13 Bankruptcy and Suspended Driver’s License

If your license is suspended due to unresolved infractions, it is important to order a driving abstract from the Department of Licensing by contacting the office by phone or at the DOL website. Going to a local DOL branch has been an option to obtain a printout but does not appear to be possible during COVID. The driving abstract will show the name of the court and infraction number and a phone number. Most unresolved tickets have been assigned to a collection agency so ultimately the collection agency needs to be located (by calling the court first) and obtaining the amount owed and address of the collection agency. It is important to include the complete infraction number for each court and collection agency on the bankruptcy schedules. When the case is filed, my procedure is to fax to the Department of Licensing the relevant bankruptcy schedules listing the infraction information as well as my client’s license information so that the license suspension can be lifted subject to paying a license reinstatement fee to the DOL. In most situations the license suspension will be lifted shortly after the Chapter 13 bankruptcy filing.

A chapter 13 bankruptcy case will discharge non-criminal driving infractions (chapter 7 will not discharge tickets). However, criminal driving infractions will not be discharged in the chapter 13 case. Even when a driver’s license is suspended due to non-dischargeable criminal driving infractions, in most situations the license can be reinstated shortly after the chapter 13 bankruptcy filing. Also it may be possible in the chapter 13 bankruptcy case to pay off the criminal driving infractions prior to the discharge depending upon the amount of the criminal infractions and my client’s ability to pay such debt in the bankruptcy case.

Basically, if your license is suspended, threatened to be suspended or if the creditor is taking collection action such as a wage garnishment, it is worth it to you to speak to an experienced bankruptcy attorney about your options. It may be that bankruptcy is not the best option, particularly if the monetary amounts owed for the tickets is modest and can best be resolved by a payment plan with the creditor but you should consider all options in dealing with ticket issues.