11.5.3.11 Bail Bonds

In order to secure appearance at trial of a criminal defendant who has been granted pre-trial release, the court may require the payment of an amount of money as security (bail). Bail is generally, but not always, returned at the conclusion of trial, regardless of the outcome.³²³ If the defendant does not show up for trial, on the other hand, or violates the terms of pre-trial release, bail may be forfeited.

Given the often unaffordable nature of bail, an industry of private bondsmen has arisen over the last 100 years, offering what is essentially an exotic form of insurance. Bondsmen generally take up to 10% to 15% of the bail amount as an upfront fee for their services and require indemnification from the defendant or defendant’s guarantors in the event that the bond is forfeited. Bondsmen also frequently take security interests in the property of the defendant or the defendant’s guarantors.

The dischargeability of forfeited bail and bond debt in a chapter 7 bankruptcy is frequently litigated and has been accorded varying treatment across jurisdictions. Courts generally look to who owes the debt and to whom.³²⁴ Some courts conclude that a debt owed to a bail bondsman by a criminal defendant for forfeited bail is nondischargeable because section 523(a)(7) of the Bankruptcy Code contemplates such a “forfeiture,” and it is in the nature of a criminal penalty imposed for the failure to appear in court.³²⁵ Courts have found this to be the case even when the debtor is not the criminal defendant but rather the criminal defendant’s personal guarantor (usually a family member). While the debtors in such cases are not the defendants, and not subject to debt imposed as part of a criminal sentence, such debts have been nevertheless deemed to be in the nature of a “forfeiture,” and their nondischargeability is justified based on the same reluctance of the bankruptcy courts to interfere with administration of criminal justice proceedings.³²⁶

Most courts, however, have found a debt owed to a bail bondsman is either not in the nature of a “fine, penalty, or forfeiture” or it is not owed “to and for the benefit of a governmental unit” and is thus subject to discharge.³²⁷ To the extent that a bondsman’s fee is itself financed by the bondsman or a third party, a common practice in some jurisdictions, that debt may be dischargeable in a chapter 7 bankruptcy.

When a bondsmen regularly take security in collateral like homes and vehicles, even if the debt for the bondsman’s fee is discharged, a bondsman may still be able to foreclose on the security interest. Still, it may be possible to reduce or eliminate the bail bondsman’s lien in a chapter 13 case.³²⁸