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13.4.2.2 Fines and Restitution

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  6. 13.4.2.2 Fines and Restitution

13.4.2.2 Fines and Restitution

The statute that provides for fines and restitution in federal criminal cases has its own list of exemptions, which includes some, but not all, of the property exempted from tax levy.214 Most non-governmental pension benefits and Social Security benefits, for example, may be garnished for criminal fines or restitution.215

The wage garnishment restrictions of the CCPA, which limit the amount that can be garnished from a debtor’s wages, retirement benefits, or similar payments, apply to collection of criminal fines and restitution.216 However, many courts hold that a lump-sum payment, as opposed to a stream of periodic payments, can be seized in its entirety.217 Nonetheless, if the consent of a non-debtor spouse is required before the debtor can cash out a pension, it cannot be seized.218

One court held that exempt property can be reached to collect contempt sanctions imposed by a bankruptcy court, which are not “mere money judgments” but “orders imposed in the public interest.”219 The Eighth Circuit held that state exemptions did not apply when the FTC obtained a disgorgement order against a defendant who had violated a permanent injunction against deceptive practices.220 Some state laws providing for restitution to crime victims also authorize the taking of otherwise exempt benefits.221 The application of exemption laws to criminal justice debts is discussed in more detail in § 11.4, supra.

Footnotes

  • 214 18 U.S.C. § 3613.

  • 215 18 U.S.C. § 3613(a), (f) (allowing United States to enforce fines and restitution without regard to Social Security anti-alienation statute and providing closed list of exemptions). See United States v. DeCay, 620 F.3d 534 (5th Cir. 2010) (pension that would be exempt under state law can be garnished to collect federal criminal restitution order, but CCPA 25% limit applies); United States v. Phillips, 303 F.3d 548 (5th Cir. 2002) (Mandatory Victim Restitution Act empowers government to use procedures of Federal Debt Collection Procedures Act to enforce an order; government could garnish retirement account); United States v. Cunningham, 866 F. Supp. 2d 1050, 1055–1056 (S.D. Iowa 2012) (state law exemption for state employee pension is inapplicable when federal government is collecting criminal restitution; harsher rule for these debts is not unconstitutional); United States v. Golden, 2010 WL 5141706 (W.D. Okla. Dec. 13, 2010) (federal law preempts state exemption; retirement fund may be garnished for restitution). See also United States v. Anderson, 2007 WL 2703160 (W.D. Okla. Sept. 13, 2007) (Oklahoma garnishment exemptions for “undue hardship” not applicable to federal garnishment for criminal restitution); United States v. Gaudet, 2004 WL 2367734 (E.D. La. Oct. 20, 2004) (husband’s pension was being garnished for restitution of funds he stole from pension fund; because wife’s rights were derivative of husband’s, that is, qualified domestic relations order awarded her a percentage of pension, she could not claim exemption), aff’d, 187 Fed. Appx. 410 (5th Cir. 2006). But cf. United States v. Wyatt, 2015 WL 148677 (D. Colo. Jan. 12, 2015) (retirement benefits held in joint and survivor annuity, as required by ERISA for married participants, may not be taken by government, even for criminal restitution, without consent of non-debtor spouse). See generally § 11.4.3, supra.

  • 216 18 U.S.C. § 3613(a)(3), (f). See United States v. Lee, 659 F.3d 619 (7th Cir. 2011) (payments from retirement accounts are earnings within the meaning of CCPA; garnishment for criminal fine is limited to 25%); United States v. DeCay, 620 F.3d 534 (5th Cir. 2010) (pension that would be exempt under state law can be garnished to collect federal criminal restitution order, but CCPA 25% limit applies); U.S. v. Thomas, 2012 WL 147876 (E.D. Cal. Jan. 18, 2012) (CCPA garnishment limits apply to criminal court’s restitution order), adopted by 2012 WL 869512 (E.D. Cal. Mar. 9, 2012). See also France v. United States, ___ U.S. ___, 136 S. Ct. 583, 193 L. Ed. 2d 465 (2015) (vacating judgment based on Solicitor General’s confession of error), vacating decision in United States v. France, 782 F.3d 820 (7th Cir. 2015) (CCPA does not protect private disability insurance payments, and section 3613 would not protect them even if CCPA did; stressing section 3613’s explicit exemption of two types of disability benefits but not private disability insurance). The Solicitor General’s brief in France v. United States, available at www.justice.gov, takes the position that private disability insurance benefits are earnings protected by the CCPA and that the CCPA protections apply to criminal restitution. See generally § 10.5.2, supra.

  • 217 See, e.g., United States v. Fussell, 567 Fed. Appx. 869 (11th Cir. 2014) (when debtor is not yet receiving periodic payments for state employees’ retirement fund, CCPA limit does not apply), aff’g 2013 WL 12080161 (S.D. Fla. Oct. 31, 2013) (allowing garnishment of entire fund when debtor had right to withdraw it as a lump sum); United States v. Hosking, 567 F.3d 329 (7th Cir. 2009) (affirming criminal court order that takes almost the entire principal of defendant’s retirement account); United States v. Novak, 476 F.3d 1041 (9th Cir. 2007) (ERISA plan can be reached for criminal restitution, but cash-out can be required only if beneficiary could take entire amount in lump sum; barred if spousal consent required); United States v. Taylor, 2012 WL 1309863 (E.D. Mich. Mar. 16, 2012) (where debtor was entitled to take entire amount in his profit-sharing account upon “separation,” defined as one year without contributions, and this will occur a few days after his release from prison, government can seize the funds when debtor becomes entitled to receive them), adopted by 2012 WL 1339081 (E.D. Mich. Apr. 17, 2012); United States v. King, 2012 WL 1080297 (E.D. Pa. Apr. 2, 2012) (CCPA cap does not apply to garnishment of corpus of retirement account for criminal restitution); United States v. McKnight, 2012 WL 5336165 (W.D. Tex. Oct. 26, 2012) (if debtor is permitted to withdraw retirement funds as lump sum, government may take the entire amount; if periodic payments are required, garnishment limited to the 25% allowed by CCPA); United States v. Greco, 2013 WL 101931 (N.D. Ohio Jan. 8, 2012) (government can seize entire lump-sum award of retroactive state employee’s disability benefits, but garnishment of future payments is limited to 25%). See also United States v. Bollin, 264 F.3d 391, 422 (4th Cir. 2001) (federal forfeiture law preempts state law restrictions, so entire IRA is subject to forfeiture). See generally § 11.4.3.4, supra (seizure of retirement benefits to pay criminal justice debt); § 14.2.1.4.2, infra (application of CCPA to periodic payments from pension plan).

  • 218 United States v. Novak, 476 F.3d 1041 (9th Cir. 2007) (ERISA plan can be reached for criminal restitution, but cash-out can be required only if beneficiary could take entire amount in lump sum; barred if spousal consent required); United States v. Wyatt, 2015 WL 148677 (D. Colo. Jan. 12, 2015) (lump-sum payout from married debtor’s ERISA account may not be required without non-debtor spouse’s consent).

  • 219 Faulkner v. Kornman, 2012 WL 864574 (Bankr. S.D. Tex. Mar. 13, 2012), aff’d, 544 Fed. Appx. 512 (5th Cir. 2013).

  • 220 Fed. Trade Comm’n v. Neiswonger, 580 F.3d 769 (8th Cir. 2009) (ordering disgorgement—here, of profits from deceptive marketing scheme—not bound by state exemptions; may seize, inter alia, retirement account).

  • 221 See, e.g., Kane v. Galtieri, 996 N.Y.S.2d 78 (N.Y. App. Div. 2014) (Son of Sam Law allowed seizure of otherwise exempt police officer’s disability pension, for wrongful death judgment based on conduct that resulted in conviction for second degree murder). But see J.M. v. Hobbs, 849 N.W.2d 480 (Neb. 2014) (amendment to anti-attachment provision allowing state police retirement benefits to be attached for civil judgments resulting from certain crimes was unconstitutional; list of covered crimes was arbitrary and unreasonable).