In what is yet an unpublished decision, Bankruptcy Judge Letitia Clark of the Southern District of Texas has issued a decision, which indicates that when suing the state agency for failing to issue a driver's license you have to distinguish between the failure to do so in an effort to collect a pecuniary loss and the State exercising it's police powers.
In In re Holder, Adv. No. 06-8003( Bankr. S.D.Tex. 12-1-2006), the Debtor filed an adversary proceeding contending that the Texas Department of Public Safety (DPS) violatedthe automatic stay in his consumer bankruptcy case by attempting to collect "surcharges", including DPS's refusal to issue a new driver's license to the Debtor.
The Court found that 11 U.S.C. Section 523(a)(7) provides that a
claim is nondischargeable "to the extent such debt is for a fine,
penalty, or forfeiture payable to and for the benefit of a governmental
unit, and is not compensation for actual pecuniary loss." This matter
appears to have been relevant because the Debtor was trying to achieve
a determination that the "surcharges" were dischargeable and this
determination directly impacts on whether the automatic stay was
violated. The Debtor had argued that since the "surcharges" went
primarily to maintenance of the public highway system in Texas that the
state was collecting for a pecuniary loss. The Court found that the
"Debtor's argument is weak. The maintenance of public highways and use
of monies to fund public transportation projects is of benefit to the
state and its citizens". As such, the Court found the "surcharge"
constituted a fine or penalty.
Debtor contends that DPS violated the automatic stay by withholding the reinstatement of Debtor's driver's license. Debtor contends that reinstatement is being withheld on the bases that he had not paid the levied surcharges and had not paid a civil judgment or posted security for the judgment. However, the Court found that the Debtor's driver's license was suspended as a result of a criminal court order. Debtor's driver's license was suspended continuously from October 14, 2003 through the petition date, October 13, 2005 (with the exception of the time from October 8, 2004 and November 29, 2004), and will be through March 2007 as a direct result of the Debtor's convictions for driving while intoxicated, for a second driving while intoxicated conviction occurring within 36 months of the first, driving without liability insurance, driving with an invalid license, and driving with a suspended license. Further, the Court found that the suspensions of Debtor's license were unrelated to his failure to pay pre or post petition surcharges owed to DPS.
The bottom line was that the Court confirmed that DPS could be found liable for violation of the automatic stay if it failed to issue a driver's license for payment of a pecuniary loss that is not a fine. However, if DPS continues to suspend the issuance of a license for a criminal court conviction for drunk driving, as directed by the criminal court, then there can be no violation of the automatic stay.
Comments