Filing bankruptcy can many times help you reinstate your suspended driver’s license.
The two most common scenarios are (1) suspension because of failure to pay a judgment arising out of a motor vehicle accident, and (2) suspension for failing to pay a traffic ticket.
An judgment from a vehicle accident usually stems from an accident where you were at fault and you failed to have adequate insurance. Most state laws give you a limited time to pay such judgments, and when you fail to timely the Department of Motor Vehicles at the request of the plaintiff will suspend your driver’s license.
When you file a Chapter 7 bankruptcy, and complete the process, that judgment debt is discharged. This means you no longer are obligated to pay it. The Department of Motor Vehicles will then reissue or reinstate your driver’s license.
However, there are exceptions. If you intentionally caused the accident, then the judgment cannot be discharged by a Chapter 7 bankruptcy.
Also, debts from accidents where you were driving under the influence of drugs, including alcohol, are not discharged in a Chapter 7 bankruptcy.
The timing of the discharge can be an issue. Technically speaking, your debts are not discharged until the end of the bankruptcy case–usually a little more than four months after you file the bankruptcy case. But in some cases the Department of Motor Vehicles will reinstate your driver’s license right after you file the case.
There is one more complication. The judgment may operate as a lien. Liens are generally not discharged in a bankruptcy even though the debt was discharged. In practical terms, this means that you may have to file a motion to avoid the judgment lien if you own a house, even though your personal obligation to pay the judgment was discharged. Otherwise, the judgment lien will survive the bankruptcy and the lien will be paid when you sell the house.
A driver’s license suspension from failure to pay a ticket is typically fixed by a Chapter 7 bankruptcy. For that scenario you will have to file a Chapter 13 where the ticket is paid pursuant to a payment plan approved by the bankruptcy court. The Department of Vehicles will usually reinstate your driver’s license as soon as your Chapter 13 Plan has been approved by the court, and sometimes right after you file the case.