In re Kent

94-11145 (Bankr. D.N.J. Dec. 5, 1995) ; Clearinghouse Number: 51102

Description

Motor Vehicle Surcharges Against High-Risk Drivers Are Nondischargeable in Bankruptcy

Abstract

The bankruptcy court has held that debtor's obligation to pay motor vehicle surcharges assessed by the state division of motor vehicles (DMV), net of administrative expenses of collection charged by DMV, are nondischargeable in bankruptcy. As part of its no-fault insurance scheme, New Jersey assesses motor vehicle surcharges against all drivers who accumulate six or more points for motor vehicle offenses or who are convicted of drunk driving. Chapter 13 debtor had sought to amend her schedule of unsecured creditors to include DMV's claim in the amount of $5,160 for prepetition motor vehicle surcharges. Although DMV argued that the surcharges might be characterized as either a nondischargeable excise tax under 11 U.S.C. § 523(a)(1) or civil penalty under 11 U.S.C. § 523(a)(7), debtor asserted that they simply raised additional premiums for high-risk drivers. The bankruptcy court found that motor vehicle surcharges were nondischargeable as civil penalties under section 523(a)(7) because they were assessed for violations of certain motor vehicle laws. Citing United States v. Halper, 490 U.S. 435 (1987), the court rejected amicus bar association's argument that such a determination would imply that motor vehicle surcharges violated the constitutional prohibition against double jeopardy. The court also found that surcharges, net of administrative collection costs retained by DMV, were collected for the benefit of a governmental unit, either the Joint Underwriting Association (JUA) or the Market Transition Facility (MTF), both created by statute to insure high-risk drivers at market rates and reduce insurance costs for other New Jersey motorists. Noting that both were funded primarily by government-imposed surcharges and that their operations had been largely controlled by the government, the court held that JUA and MTF constituted "government units" within the meaning of section 523(a)(7).

Additional Information

Attorney Information
Debtor represented by John Rodgers, 9 Tanner St., P.O. Box 207, Haddonfield, NJ 07039-4903.
Docket Date
1970-01-01 06:00:00+00:00