Property damage liability is a type of car insurance. In this article, we’ll define the term “property damage liability” and explain how it relates to auto accident law and bankruptcy law. 

Key Takeaways

• Property damage liability is a type of car insurance that pays for damage the policyholder does to somebody else’s property
• Most states require drivers to carry property damage liability insurance, with the exact amount varying from state to state
• Property damage liability debts may be discharged in Chapter 7 bankruptcy unless the accident happened while the driver was under the influence or if the collision was willful or malicious
• Property damage liability insurance proceeds may or may not be considered part of the bankruptcy estate depending on if the property damaged is or is not exempt

What Is Property Damage Liability?

Property damage liability insurance is a type of car insurance that covers the insured person in the event that they damage somebody else’s property in an accident. This can be a variety of types of property including:

• Cars
• Houses
• Trees
• Other automotive vehicles
• Bicycles
• Fences
• Lampposts
• Buildings 
• Mailboxes

Property Damage Liability in Auto Accidents

Most states require drivers to have property damage liability insurance, with the exact amount required varying from state to state.

The amount of property damage liability insurance required by each state is listed below.

• Alabama: $25,000
• Alaska: $25,000
• Arizona: $10,000
• Arkansas: $25,000
• California: $5,000
• Colorado: $15,000
• Connecticut: $20,000
• Delaware: $10,000
• District of Columbia: $10,000
• Florida: $10,000
• Georgia: $25,000
• Hawaii: $10,000
• Idaho: $15,000
• Illinois: $20,000
• Indiana: $25,000
• Iowa: $15,000
• Kansas: $25,000
• Kentucky: $25,000
• Louisiana: $25,000
• Maine: $25,000
• Maryland: $15,000
• Massachusetts: $5,000
• Michigan: $10,000
• Minnesota: $10,000
• Mississippi: $25,000
• Missouri: $25,000
• Montana: $20,000
• Nebraska: $25,000
• Nevada: $20,000
• New Hampshire: $25,000
• New Jersey: $5,000
• New Mexico: $10,000
• New York: $10,000
• North Carolina: $25,000
• North Dakota: $25,000
• Ohio: $25,000
• Oklahoma: $25,000
• Oregon: $20,000
• Pennsylvania: $5,000
• Rhode Island: $25,000
• South Carolina: $25,000
• South Dakota: $25,000
• Tennessee: $15,000
• Texas: $25,000
• Utah: $15,000
• Vermont: $10,000
• Virginia: $20,000
• Washington: $10,000
• West Virginia: $25,000
• Wisconsin: $10,000
• Wyoming: $20,000

Property Damage Liability in Bankruptcy

If you don’t have property damage liability insurance and are held liable for damaging another party’s property with your car, you will have to pay the cost of the damages out of pocket. This can be a tremendous sum that can contribute or lead to filing for bankruptcy. In this situation, you may wonder if, like other debts, the money you owe for the property damage will be discharged as part of your bankruptcy process. 

Usually, the answer is yes. However, there are two situations in which this debt will not be discharged. 

• If you caused the accident while driving under the influence of drugs or alcohol
• If you caused the accident willfully or maliciously 

In short, as long as you were sober and the accident was indeed accidental, the money you owe for property damage can be discharged if you file for Chapter 7 bankruptcy. 

Now what about if you file for bankruptcy and are owed money from somebody else’s property damage liability insurance if they damaged your property with their car? Must you list these insurance proceeds as an asset that will be added to your bankruptcy estate, seized, and distributed to your creditors? If the property that was damaged is exempt property, the answer may be no. However, this varies on a case by case basis and it is highly recommended to ask your bankruptcy lawyer who will be able to help you understand what will happen with your particular bankruptcy case.