Can criminal restitution be discharged in bankruptcy?

criminal restitution and bankruptcyUnfortunately no, criminal restitution cannot be discharged in bankruptcy. However, the automatic stay will prevent any creditor or court from forcing a payment while your bankruptcy is pending. This could last up to 5 years.

The Automatic Stay protects clients from any collection efforts, while his bankruptcy case is still pending. 11 U.S.C. § 362(a)(1) of the Bankruptcy Code protects the Debtor/Defendant from any attempt ‘to recover a claim against the debtor that arose before the commencement of the case under this title.”  11 U.S.C. § 362(b) then goes on to list any exceptions to this rule, none of which apply in the present circumstances.

The closest exception comes under 11 U.S.C. § 362(b)(1) which states the stay does not operate as a stay against “the commencement or continuation of a criminal action or proceeding.”  However, In re: Storozhenko, 458 BR 905 (ED Michigan), states “criminal restitution must be deemed to be relief that is civil in nature, not criminal, for the purpose of 11 U.S.C. § 362(b)(1) exception to the automatic stay.  In re: Storozhenko goes on to say “at most, the federal statute would, temporarily (i.e. only until the automatic stay terminates under 11U.S.C. §362(c)), prevent the state court from complying with the state statute that mandates restitution as a condition for probation.

Westlaw’s Keynote #3 for In re: Storozhenko goes on the summarize the case by saying “bankruptcy court’s action did not prevent state court from placing debtor on probation, assuming that state court had determined that probation was appropriate, but merely prevented it from ordering restitution payable to state court receiver as a condition for such probation while stay was in effect.”

This is true for whether a Chapter 7 or Chapter 13 bankruptcy is filed. However, by filing a Ch 13 bankruptcy, you are afforded more time to put together a plan to resolve the debt.

If you are struggling with a criminal restitution payment, and live in West Michigan, please give a call to discuss what we can do to help.

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