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Collection Actions: 11.5.4.1 Generally

A chapter 13 bankruptcy can provide relief from a somewhat broader, although not entirely comprehensive, variety of criminal justice debt than under chapter 7. Unlike the chapter 7 process of liquidation and distribution of assets by the trustee, the chapter 13 reorganization process allows debtors to place some or all of their debts into a plan for payment. The debtor’s chapter 13 plan payments are based on the debts to be paid under the plan, the requirements of chapter 13, and the debtor’s ability to pay based on disposable income.

Collection Actions: 11.5.4.2 Criminal Justice Debt Subject to Discharge Under Chapter 13

In contrast to the complicated exception analysis applicable to chapter 7, the application of chapter 13 to criminal justice debt is straightforward. Under chapter 13 all criminal justice debt, except punitive fines or restitution377 entered as part of a sentence in a criminal case and certain federal criminal fines,378 is generally dischargeable upon successful completion of a chapter 13 plan.

Collection Actions: 11.5.4.3 Traffic Fines and Parking Tickets Under Chapter 13

Municipal court fines and traffic fines are frequently found to be dischargeable under chapter 13 if the underlying nature of the action is determined to be civil rather than criminal.386 Dischargeability will therefore depend on whether the fines are characterized under state law as civil or criminal. For example, state law may define traffic fines imposed by a municipal court as civil where imprisonment is not a potential sanction for the offense.387

Collection Actions: 11.5.4.4.1 Classification of criminal justice debts in chapter 13 plans

In a chapter 13 bankruptcy case, the debtor proposes a plan to pay their disposable income to designated classes of creditors. These classes typically include secured, unsecured, and certain priority creditors. Debts owed to priority creditors, such as those for child support and certain taxes, must be paid in full under the plan. Most criminal justice debt is not secured and does not fit within any of the statutory priority categories.

Collection Actions: 11.5.4.4.3 Separate classification facilitates debtors’ participation in chapter 13

In enacting the 1978 Bankruptcy Code, Congress expressed a clear preference that consumers who file for bankruptcy relief do so under chapter 13 rather than chapter 7.405 Chapter 13 facilitates the adjustment of debts by allowing flexible repayment schedules as an alternative to the liquidation of debts. The chapter 13 debtor pays debts out of postpetition income, typically from earnings. Unlike many other obligations, criminal justice debt may impose significant limitations on the debtor’s ability to earn.

Collection Actions: 11.5.4.4.4 Making the case for separate classification of criminal justice debt

When courts refuse to approve separate classifications for criminal justice debt, it is often for one of two reasons—either the plan proposes to pay nothing to unsecured creditors other than the criminal justice debt creditor,407 or the debtors have not shown that they face a concrete threat to their earning capacity absent the preferential treatment for criminal justice debt. As discussed below, advocates need to consider both of these concerns when drafting chapter 13 plans that propose special classification of criminal justice debt.

Collection Actions: 11.5.4.4.5 Other options for special classification of criminal justice debt in chapter 13

When courts are inclined to apply section 1322(b)(1) rigidly, and disfavor significant disparate treatment of criminal justice debt in chapter 13, advocates should consider two other options. One is to provide for payment of the obligation under the “cure and maintain” provisions of section 1322(b)(5). The other is to structure the plan payments so that significant disbursements toward the criminal justice debt occur after the first thirty-six months of the plan.

Collection Actions: 11.5.4.4.6 Enforcement of the chapter 13 plan confirmation order

Regardless of how a chapter 13 plan structures payment of criminal justice debt, the treatment binds all parties once the bankruptcy court enters an order confirming the plan. As long as the parties had notice of the plan’s terms and the opportunity to object before the court entered the order, the confirmed plan terms have the res judicata effect of a final federal court judgment.424

Collection Actions: 11.5.4.4.7 The good faith requirement

A plan must also be proposed “in good faith,” or be subject to denial.431 To determine whether a plan is in good faith, courts will look at “[f]actors such as the type of debt sought to be discharged, whether the debt is non-dischargeable in chapter 7, and the debtor’s motivation and sincerity in seeking chapter 13 relief[.]”432 Citing these factors, at least one court has denied a plan that proposed to pay only restitution and indigent defense fees.43

Collection Actions: 11.6.1.1.1 Right to counsel under the Due Process Clause

Pursuant to Turner v. Rogers, before imprisoning someone for failure to make a payment, a court must provide the defendant with due process, including a meaningful assessment of ability to pay.435 Ensuring that the assessment is meaningful may require appointment of counsel and other procedural protections generally afforded to criminal defendants. The Court has recognized as appropriate in some civil contempt proceedings alternative procedures, including:

Collection Actions: 11.6.1.1.2 Right to counsel under the Sixth Amendment

The Sixth Amendment may give rise to a right to counsel. Specifically, the Sixth Amendment grants an indigent defendant the right to state-appointed counsel in criminal contempt proceedings (other than summary proceedings).440 This could implicate proceedings related to criminal justice debt—for example, when someone is being prosecuted for criminal contempt or another criminal violation due to nonpayment or failure to appear.441

Collection Actions: 11.6.1.3 Bias Based Upon Financial Interests

The Due Process Clause prohibits judicial officers from having a personal, financial stake in a case’s outcome,453 which may be relevant when a court or a private probation company both benefits financially from and helps determine the assessment or collection of criminal justice debts.

Collection Actions: 11.6.1.4 Excessive fines

The Excessive Fines Clause is typically applied to government-imposed fines—and punitive asset forfeitures—grossly disproportionate to the offense.460 Scholars posit that the historical record supports a broader reading of the Excessive Fines Clause.

Collection Actions: 11.6.3.1 Application of the ECOA to Court Debt

Unlike Title VI,506 the Equal Credit Opportunity Act (ECOA) provides for a private right of action not only for disparate treatment on the basis of race, color, religion, national origin, sex, marital status, or age, but also for practices that have a disparate impact on those bases.507 Notably, the ECOA also provides a private right of action to challenge disparate treatment or impact on the basis that a consumer’s applicant’s income derives from a public assistance program.

Collection Actions: 11.6.3.2.1 Overview

Courts assessing lending discrimination claims have generally adopted the burden shifting and evidentiary framework used in employment discrimination cases.518 To make out a prima facie case of disparate impact, an ECOA plaintiff must: (1) identify a specific, facially neutral policy or practice adopted by the defendant; (2) allege a disparate impact on a protected group; and (3) show a causal relationship between the challenged policy or practice and the alleged disparate impact.519 If the

Collection Actions: 11.6.3.2.2 Identifying a defendant, policy, and causation

The first step in setting out an ECOA disparate impact claim is identifying the actor and the policy that cause the discriminatory harm. “It is not enough to simply allege that there is a disparate impact on [consumers], or point to a generalized policy that leads to such an impact. Rather, the [plaintiff] is responsible for isolating and identifying the specific . . . practices that are allegedly responsible for any observed statistical disparities.”521

Collection Actions: 11.6.3.2.3 Shifting the burden

Once the plaintiff sets out a prima facie case of disparate impact, the burden shifts to the defendant to establish “that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent or defendant.”526 The analogous test in the employment discrimination context requires that employers demonstrate both business necessity and job-relatedness.527 In the ECOA context, then, creditors should have to demonstrate both necessity an

Collection Actions: 11.6.3.3 Examples of ECOA Criminal Justice Debt Claims

The following illustrates the types of criminal justice debt practices that might give rise to ECOA claims. Consider when wage earners have an easier time accessing favorable payment plans and avoiding harsh collection tactics than do those whose earnings are derived primarily from public benefits, or when those who receive income solely from public benefits are not eligible for payment plans.

Collection Actions: 11.6.4.1 Application of FDCPA Substantive Requirements to Criminal Justice Debt

The Fair Debt Collection Practices Act (FDCPA) extensively regulates the collection of debts and provides private remedies for Act violations.538 As described in the next two subsections, application of the FDCPA to criminal justice debt must contend with whether the Act applies to parties involved in the collection of government debt and whether criminal justice debt falls within the scope of “debt” covered by the Act.

Collection Actions: 11.6.4.2 Actors Covered by the FDCPA

The FDCPA does not apply to original creditors or to “any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties.”546 The Act does, however, apply to private, third-party debt collectors, even when expressly authorized by law—or contracted by government officials—to serve as debt collectors.547

Collection Actions: 11.6.5 Fair Credit Reporting Act

One of the potential adverse consequences of criminal justice debt is that both the debt and its nonpayment might be reported to a consumer reporting agency (CRA), though the legal landscape has been changing. The Fair Credit Reporting Act (FCRA) regulates consumer rights in this area (as to the practices of CRAs) and those who furnish or use information from the CRAs.