Southern District of Texas Court upholds Bankruptcy Court ruling that surcharges for traffic offenses are non-dischargeable

23 Oct Southern District of Texas Court upholds Bankruptcy Court ruling that surcharges for traffic offenses are non-dischargeable

A debtor was cited on numerous occassions both before and during the pendency of his bankruptcy case for driving while intoxictated, driving without liability insurance, and driving without a valid driver’s license. The citiations resulted in “virtuallly continuous suspension” of debtor’s driver’s license as well as imposition of approximately $6000.00 in surcharges owed to the Texas Department of Public Safety (“DPS”). The debtor argued that DPS was withholding his license because he failed to pay the surcharges thus violating the automatic stay. The debtor further argued he was entitled to have his license reinstated and that the surcharges were dischargeable in his bankruptcy. DPS argued that all but 1% of the surcharges which were to pay administrative costs were nondischargeable governmental fines or penalties. The district court affirmed the bankruptcy court’s ruling.

While the Bankruptcy Code does not define the terms “fine, penalty, or forfeiture,” Courts have found that “surcharges imposed for convictions of traffic law violations have uniformly been found to be fines or penalties.” The Court in this case followed other Texas courts that have found a license surcharge or reinstatement fee is not a criminal punishment in violation of double jeopardy.

The District Court also stated that under the Texas surcharge system, the state is not a contingent beneficiary -Texas is a direct beneficiary of the funds. Further, the surcharges do not compensate for pecuniary loss.
It turns out the Debtor’s driver’s license was suspended for reasons completely unrelated to his failure to pay the pre or post-petition surcharges. Further, the Debtor’s license had been suspended almost continuously from October 2003 to October 2005 (the year he filed for bankruptcy) due to his convictions for driving while intoxicated, driving without liability insurance, driving with an invalid driver’s license, and driving with a suspended driver’s license. His most recent suspension suspended his driver’s license through March 2007. This suspension was the result of a judgment in a criminal proceeding. The court found that even if the debtor owed no surcharges, he still would not be entitled to the reinstatement of his driver’s license.

Holder v. Texas Department of Public Safety and Thomas A. Davis, Jr. 2007 WL 2872673 (S.D.Tex.)

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
  • David Ruff
    Posted at 14:35h, 09 June

    I’m a bk attorney in Texarkana.

    Could you send me the case number for the court ruling denying discharge of dps surcharges for dwi?