Can Criminal Restitution Be Discharged In A Bankruptcy?

Businessman in jail

Criminal restitution ordered to be paid to victim of a crime, or a qualified third party (such as an insurance company, pawnbroker etc.), is common in criminal courts.  From misdemeanors to the most serious felonies, restitution is often ordered to compensate the party who suffered a financial loss as a result of the criminal behavior. Restitution can be ordered as a condition of probation, but it can also be imposed as a lien on the Defendant. The amount of restitution ordered can vary greatly.  For example, consider a situation where a driver loses control of his vehicle, and runs over a neighbor’s mailbox.  Ignoring the fact that car insurance would most likely cover the damage, a judge could order the driver to pay the neighbor for the value of the mailbox.  This might be $30 or so.  Now consider the Bernie Madoff Ponzi scheme scandal.  As a result of his crimes, Madoff was ordered to pay $170 Billion in restitution. (1)

So when the idea of “owing money” comes up, people often think of Bankruptcy as a potential solution.  Many times, bankruptcy can be a great ticket out of financial ruin.  The question then becomes: can criminal restitution be wiped out through bankruptcy? The short answer is “no,” however bankruptcy can make paying the restitution much easier.

According to 11 USC 523(a)(7) criminal restitution is not a debt that can be wiped out in bankruptcy. The reason is because it falls under the law’s definition of a “fine, penalty, or forfeiture payable to and for the benefit of a governmental unity…”  (2) Basically, if you file for any type of bankruptcy, you will still be responsible for repaying restitution. It does not go away.

How to Get Some Relief

There are different types of bankruptcy.  A Chapter 13 bankruptcy may offer you some relief in paying your restitution by getting on a repayment plan. Chapter 13 allows individuals to repay a portion of debts over a three to five year period. If you were to file for Chapter 13, you would be placed on a monthly repayment plan. While you cannot discharge (eliminate) criminal restitution, you could spread the payments out over 3 to 5 years, and potentially get rid of whatever other debts you may owe.  While a Chapter 7 bankruptcy wouldn’t directly affect your criminal restitution, eliminating other unsecured debts may free up the money needed to repay it.

Contact the experienced Florida Bankruptcy Lawyers at Berkowitz & Myer for a no cost consultation regarding your bankruptcy options.  We look forward to helping you.

(1)https://web.archive.org/web/20090702140614/http://www.cbc.ca/money/story/2009/06/29/madoff-ponzi-fraud-sentence564.html

(2)http://codes.lp.findlaw.com/uscode/11/5/II/523

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