Can you discharge New York DMV civil penalties for driving without insurance in a Chapter 13 bankruptcy?

Plain-English summary

Article 6 of New York's Vehicle and Traffic Law (the Motor Vehicle Financial Security Act) imposes a $500 civil penalty on anyone caught operating a motor vehicle without adequate insurance, and Section 318(11)(e) flatly says a bankruptcy discharge does not relieve a person of these penalties. Federal bankruptcy law tells a different story: Chapter 13 of the U.S. Bankruptcy Code permits discharge of civil fines and penalties when the debtor completes plan payments. The DMV Commissioner asked which one wins.

Attorney General Dennis C. Vacco concluded federal law wins. Under the Supremacy Clause, a state statute cannot stand as an obstacle to the full purposes of a federal statute. The U.S. Supreme Court in Perez v Campbell, 402 US 637 (1971), invalidated an Arizona statute that tried to deny bankruptcy debtors relief from motor-vehicle liability judgments for exactly that reason. The same logic applies to V&T Law § 318(11)(e): it frustrates the federal Bankruptcy Code's purpose of giving debtors a fresh start. So a Chapter 13 debtor who completes plan payments can discharge DMV civil penalties imposed under Article 6.

Currency note

This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What does "discharge" mean in bankruptcy?
A: A discharge wipes out the debtor's personal liability on covered debts, so the creditor can no longer collect them. In Chapter 13, the discharge typically takes effect after the debtor completes payments under a three-to-five-year plan.

Q: What is the $500 penalty for?
A: Under V&T Law § 319(5), the DMV imposed a $500 civil penalty on people found to have operated a motor vehicle without adequate insurance, on top of suspending registrations and licenses.

Q: Was this opinion written before the federal BAPCPA changes?
A: Yes. The opinion is from 1998; the federal Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 substantially rewrote 11 U.S.C. § 1328(a), tightening which government fines and penalties remain dischargeable in Chapter 13. Anyone applying this opinion in present-day cases must check the current text of § 1328(a) and recent case law on which government fines survive a Chapter 13 discharge.

Q: Did the opinion say § 318(11)(e) was unconstitutional in all bankruptcies?
A: It addressed Chapter 13 specifically. The opinion drew on a 1983 AG opinion (No. 83-F19) for the same conclusion. Treatment of these penalties under Chapter 7 was not the question presented.

Q: What was the Perez v Campbell rule?
A: A state statute that "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" is invalid under the Supremacy Clause, even if it does not directly conflict with the text of the federal law. The two-step inquiry asks (1) what each statute means and (2) whether they conflict in operation.

Background and statutory framework

The Motor Vehicle Financial Security Act, V&T Law Article 6, was enacted to protect victims of motor vehicle accidents by ensuring drivers carry insurance. The legislature attached real consequences to non-compliance: license and registration suspensions plus the $500 civil penalty under § 319(5). To prevent debtors from using bankruptcy to escape the penalty, § 318(11)(e) declared the penalties non-dischargeable.

Federal bankruptcy law treats this kind of state escape clause skeptically. The Supreme Court's decision in Perez v Campbell invalidated a similar Arizona provision. In Chapter 13, 11 U.S.C. § 1328(a) at the time of this opinion permitted discharge of civil fines and penalties on plan completion. Bankruptcy courts had applied that broad rule consistently, including In re Games and In re Christensen.

The 1998 opinion's central move was to apply Perez's "obstacle" preemption to the specific text of § 318(11)(e) and conclude the state provision could not stand against the Bankruptcy Code's fresh-start purpose, as articulated in Matter of Anonymous, 74 NY2d 938 (1989).

Citations and references

Statutes:

• 11 U.S.C. § 1328 (Chapter 13 discharge)
• N.Y. Vehicle and Traffic Law § 310 (legislative purpose)
• N.Y. Vehicle and Traffic Law § 318 (penalties)
• N.Y. Vehicle and Traffic Law § 319 ($500 civil penalty)

Cases:

• Perez v Campbell, 402 U.S. 637 (1971) (Supremacy Clause invalidates state statute that obstructs federal bankruptcy purposes)
• Hines v Davidowitz, 312 U.S. 52, 67 (1941) (obstacle preemption standard)
• Matter of Anonymous, 74 N.Y.2d 938 (1989) (Bankruptcy Act's primary purpose is fresh start)
• In re Games, 213 B.R. 773 (Bankr. E.D. Wash. 1997) (civil penalties dischargeable in Chapter 13)
• In re Christensen, 95 B.R. 886 (Bankr. D.N.J. 1988) (same)

Prior AG opinion:

• Op Atty Gen No. 83-F19

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/98-F10_pw.pdf

Original opinion text

Opn. 98-F10
VEHICLE AND TRAFFIC LAW, ART 6, §§310(2), 318, 319; UNITED STATES BANKRUPTCY
CODE, CHAPTER 13; 11 USCA § 1328(a).
Under the Supremacy Clause of the Constitution, section 318(11)(e) of the Vehicle and Traffic Law is
superseded by Chapter 13 of the bankruptcy laws. Civil penalties owed to the Department of Motor
Vehicles under article 6 of the Vehicle and Traffic Law are dischargeable in a Chapter 13 bankruptcy
where the debtor completes payments under a Chapter 13 plan.
November 30, 1998
Hon. Richard E. Jackson, Jr.
Commissioner, NYS Department
of Motor Vehicles
Swan Street Bldg.
Empire State Plaza
Albany, New York 12228

Formal Opinion
No. 98-F10

Dear Commissioner Jackson:
Your counsel has requested an opinion regarding an apparent conflict between the United States
Bankruptcy Code and the New York State Vehicle and Traffic Law. Specifically, counsel has asked
whether civil penalties owed to the Department of Motor Vehicles under article 6 of the Vehicle and
Traffic Law are dischargeable in a Chapter 13 bankruptcy.
Article 6 of the Vehicle and Traffic Law, entitled the "Motor Vehicle Financial Security Act," sets forth
the financial security requirements for motor vehicle owners and operators. Under this article, a $500
civil penalty is imposed on persons who are found to have operated a motor vehicle without adequate
insurance. Vehicle and Traffic Law § 319(5). Additionally, this article provides that "[a] discharge in
bankruptcy shall not relieve a person of the penalties and disabilities provided in this article." Id., §318
(11)(e). Accordingly, under the provisions of the Motor Vehicle Financial Security Act, the $500 civil
penalty imposed for operating a motor vehicle without adequate insurance is not dischargeable in
bankruptcy.
Although the Motor Vehicle Financial Security Act provides that penalties imposed under the Act are
not dischargeable in bankruptcy, this is contrary to the provisions of the UnitedStates Bankruptcy Code.
In a Chapter 13 bankruptcy, a debtor may discharge debts for civil fines and penalties. 11USCA § 1328
(a); In re Games, 213 BR 773, 776 (Bankr ED Wash 1997); In re Christensen, 95 BR 886, 889 (Bankr
DNJ 1988). Therefore, as we stated in a prior opinion, civil penalties imposed under the Motor Vehicle
Financial Security Act are dischargeable in a Chapter 13 bankruptcy where the debtor completes
payments under a Chapter 13 plan. Op Atty Gen No.83-F19.
In Perez v Campbell, 402 US 637 (1971), the Supreme Court of the United States invalidated a
provision of Arizona's Motor Vehicle Safety Responsibility Act because it was contrary to the principles
underlying the bankruptcy laws. In Perez, the state statute at issue provided that "[a] discharge in
bankruptcy following the rendering of any such judgment shall not relieve the judgment debtor from any
of the requirements of this article." 402 US at 642. The Court held that because this provision frustrated
the full effectiveness of the federal Bankruptcy Act it was invalid under the Supremacy Clause of the

Constitution.
The Supreme Court in Perez stated that "[d]eciding whether a state statute is in conflict with a federal
statute and hence invalid under the Supremacy Clause is essentially a two-step process of first
ascertaining the construction of the two statutes and then determining the constitutional question
whether they are in conflict." 402 US at 644. In making this decision, a court must "determine whether a
challenged state statute 'stands as an obstacle to the accomplishment and execution of the full purposes
and objectives of Congress.'" 402 US at 649 (quoting Hines v Davidowitz, 312 US 52, 67 [1941]).
"The primary purpose of the Bankruptcy Act is to give debtors 'a new opportunity in life and a clear
field for future effort, unhampered by the pressure and discouragement of preexisting debt.'" Matter of
Anonymous, 74 NY2d 938, 939 (1989) (quoting Perez v Campbell, 402 US 637, 648 [1971]). "This
purpose may be defeated if certain benefits are denied because the debtor has filed a petition in
bankruptcy or because the debtor refuses to reaffirm or reinstate obligations which have been discharged
by bankruptcy." Matter of Anonymous, 74 NY2d at 939.
The declared purpose of the New York State Motor Vehicle Financial Security Act is as follows:
The legislature is concerned over the rising toll of motor vehicle accidents and the suffering
and loss thereby inflicted. The legislature determines that it is a matter of grave concern that
motorists shall be financially able to respond in damages for their negligent acts, so that
innocent victims of motor vehicle accidents may be recompensed for the injury and
financial loss inflicted upon them. Vehicle and Traffic Law § 310(2).
To achieve this purpose, the legislature enacted several provisions imposing penalties for failure to
maintain adequate motor vehicle insurance. These penalties include, inter alia, suspensions of
registrations and driver's licenses, fines and civil penalties. Vehicle and Traffic Law §§ 318, 319. In an
attempt to enforce these penalties, the legislature provided that "[a] discharge in bankruptcy shall not
relieve a person of the penalties and disabilities provided in this article." Vehicle and Traffic Law § 318
(11)(e).
Section 318(11)(e) of the Vehicle and Traffic Law "stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress" (Perez v Campbell, supra) in a Chapter 13
bankruptcy because it does not permit debtors to have "a new opportunity in life and a clear field for
future effort, unhampered by the pressure and discouragement of pre-existing debt" (Matter of
Anonymous, supra). Accordingly, because section 318(11)(e) "frustrates the full effectiveness of federal
law" in a Chapter 13 bankruptcy (Perez v Campbell, supra), it is superseded by Chapter 13 under the
Supremacy Clause of the Constitution.
We conclude that under the Supremacy Clause of the Constitution, section 318(11)(e) of the Vehicle and
Traffic Law is superseded by Chapter 13 of the bankruptcy laws. Civil penalties owed to the Department
of Motor Vehicles under article 6 of the Vehicle and Traffic Law are dischargeable in a Chapter 13
bankruptcy where the debtor completes payments under a Chapter 13 plan.
Very truly yours,
DENNIS C. VACCO
Attorney General