§ 136.22     Driving or Boating while Intoxicated Priority after BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 136.22, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

BAPCPA added a new tenth priority to § 507(a) for “allowed claims for death or personal injury resulting from the operation of a motor vehicle or vessel if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.”1 The holder of a DWI claim that falls within this new priority is entitled to payment in full as a condition of confirmation in a Chapter 13 case unless the claim holder consents to other treatment.2

[2]

The new priority for DWI claims in § 507(a)(10) is not exactly coextensive with the exception to discharge in § 523(a)(9). The new tenth priority is restricted to claims for death or personal injury resulting from the operation of a motor vehicle or vessel. The analogous exception to discharge in § 523(a)(9) was amended by BAPCPA to include unlawful operation of an aircraft by an intoxicated debtor.3 The exception to discharge in § 523(a)(9) is applicable at the completion of payments in a Chapter 13 case4 and excepts from discharge debts “caused by” driving, boating or flying while illegally intoxicated; the priority in § 507(a)(10) includes debts “resulting from” driving or boating while intoxicated. Allowed claims for death or personal injury resulting from (caused by) the operation of a motor vehicle or vessel that was unlawful because the debtor was intoxicated will be both priority claims entitled to full payment in a Chapter 13 case under § 507(a)(10) and nondischargeable at the completion of payments under § 1328(a). Because this new tenth priority is worded in terms of “allowed claims,” it is also possible for a qualifying DWI claim to be a secured debt in a Chapter 13 case.5 A DWI debt fitting the description in § 507(a)(10) that was reduced to judgment and became a lien under state law could fit three categories: it would be a priority debt under § 507(a)(10); it would be nondischargeable under § 1328(a) and (b); and it would be a secured debt at confirmation under § 1325(a)(5).

[3]

This new DWI priority could be big trouble for some Chapter 13 debtors. Claims for death or personal injury typically are large claims. A large DWI claim that fits the new tenth priority in § 507(a)(10) must be paid in full through the Chapter 13 plan unless the claim holder consents otherwise. Without consent, the debtor will not be able to confirm a plan unless the debtor is financially able to pay the DWI claim in full.

[4]

Ironically, the priority status granted by new § 507(a)(10) will be a persuasive basis for separate classification of the DWI debt for payment in full through the Chapter 13 plan notwithstanding that the debtor is financially unable to pay all unsecured debts in full.6 There is further irony in the way BAPCPA would determine and distribute disposable income in a case involving a large DWI claim. For a Chapter 13 debtor with current monthly income (CMI) greater than applicable median family income, “amounts reasonably necessary to be expended—” for purposes of determining disposable income under § 1325(b) are determined in accordance with § 707(b)(2)(A) and (B).7 Under § 707(b)(2)(A)(iv), a Chapter 13 debtor with CMI greater than applicable median family income includes in allowable expenses 1/60th of all claims entitled to priority.8 In other words, the disposable income that must be committed to the payment of unsecured creditors for a Chapter 13 debtor with CMI greater than applicable median family income is net of all amounts necessary to pay priority debts in full.

[5]

Following the scheme created by BAPCPA, a Chapter 13 debtor with CMI greater than applicable median family income who also has a large DWI debt would deduct that entire priority debt from CMI to determine the amount of disposable income that is then available to be distributed to unsecured creditors under the plan. The same DWI debt that was deducted to determine disposable income would then be first payable as an unsecured priority debt from the disposable income of the debtor after confirmation of a plan. This mathematics sounds silly, but there is much silly mathematics in BAPCPA. The result is not silly: because of the new priority in § 507(a)(10), a Chapter 13 debtor with CMI greater than applicable median family income is permitted to pay a priority DWI debt through the Chapter 13 plan out of the pockets of the general unsecured creditors.


 

1  11 U.S.C. § 507(a)(10), discussed in § 440.1 [ New and Changed Priority Claims ] § 73.3  Priority Claims Added or Changed by BAPCPA.

 

2  See 11 U.S.C. § 1322(a)(2), discussed in § 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

3  See 11 U.S.C. § 523(a)(9), discussed in § 555.1 [ Boating or Flying while Intoxicated: § 523(a)(9) ] § 159.8  Boating or Flying while Intoxicated: § 523(a)(9).

 

4  See 11 U.S.C. § 1328(a)(2), discussed in § 555.1 [ Boating or Flying while Intoxicated: § 523(a)(9) ] § 159.8  Boating or Flying while Intoxicated: § 523(a)(9).

 

5  See § 521.1 [ Secured Priority Claims ] § 136.19  Secured Priority Claims after BAPCPA.

 

6  See discussion of the unfair discrimination standard in 11 U.S.C. § 1322(b)(1) in § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination and § 87.5  Priority Claims after BAPCPA.

 

7  See 11 U.S.C. § 1325(b)(1)(B) and discussion of projected disposable income beginning at § 94.1  Big Picture: Too Many Issues§ 95.1  In General§ 99.1  In General and § 96.1  Average Monthly Payments on Account of Secured Debts§ 97.1  Total Priority Debts and Divide by 60 and § 98.1  Additional Expenses or Adjustments to CMI. 

 

8  11 U.S.C. § 707(b)(2)(A)(iv), discussed in § 486.1 [ Total Priority Debts and Divide by 60 ] § 97.1  Total Priority Debts and Divide by 60.