Unfair and Deceptive Acts and Practices: 13.6.3.10 Civil Penalties in Bankruptcy
Section 523(a)(7) of the Bankruptcy Code exempts from discharge in a chapter 7 case a “fine, penalty, or forfeiture payable to and for the benefit of a governmental unit”.598 To be excepted from discharge, the fine, penalty, or forfeiture must not be “compensation for actual pecuniary loss” to the government.599 If a penalty meets all elements of this definition, it is nondischargeable in a chapter 7 case, even if it was imposed in a civil proceeding.600