One of the chief purposes of bankruptcy is to discharge debts that you can’t afford to pay which can provide you with a fresh financial start. Because it is not always in the best interest of the general population to allow the discharge of certain debts, Congress has made some debts non-dischargeable, like child support obligations, most student loans, and some tax debts. Included in this list are criminal fines and court-ordered restitution. Bankruptcy will simply not allow you to escape criminal liability.
Section 523(a)(7) of the bankruptcy code states:
“a discharge under section 727, 1141, 1228(a), or 1328(b) of this title does not discharge an individual from any debt – 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, other than a tax penalty.”
In a Chapter 7 case, government fines are not dischargeable, including fines for criminal wrongdoing. However, a Chapter 13 debtor who completes all plan payments may be able to discharge certain non-criminal government fines. Section 1328(a)(3) of the bankruptcy code states that a Chapter 13 debtor who completes all payments under the Plan receives a discharge “of all debts provided for by the plan or disallowed under section 502 of this title, except any debt – for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime.” (Emphasis added).
In other words, if your fine is for a criminal act as defined by the state government, it is not dischargeable in Chapter 7 or Chapter 13. If the fine is considered a civil penalty, it is not dischargeable in Chapter 7, but is discharged at the conclusion of your Chapter 13 case.
Each state classifies offenses like DUI, traffic violations, and even parking tickets as either “crimes” or “civil infractions.” Civil infractions are often minor offenses like driving a few miles over the speed limit or running a stop sign. Non-criminal fines are categorized with other unsecured creditors in the Chapter 13 plan, and paid whatever the debtor can afford over three to five years. Whatever is not paid during the plan is discharged at the end.
Even if a criminal fine is not dischargeable during bankruptcy, it can be included in the Chapter 13 plan. The creditor (often the state government) is not allowed to collect from the debtor during the bankruptcy. In some cases this can prevent the debtor from having a license revoked or spending time in jail for non-payment of the fine. At the end of the case a non-dischargeable debt survives and the state can collect from you.
If you need to file bankruptcy and have outstanding government fines, speak with an experienced bankruptcy attorney and discuss your options. Bankruptcy can provide extra time for paying the fine, or possibly discharge the debt altogether. Get the facts from yoru specific case from your attorney.