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Collection Actions: 11.5.3.4 Victim Restitution

Victim restitution is generally not subject to discharge in a chapter 7 bankruptcy. However, like many other terms in the world of criminal justice debt, the term “restitution” is defined in different ways across jurisdictions. In certain jurisdictions, for example, the term is confusingly applied to all criminal justice debt, including payment to the state of certain costs of the criminal proceeding.

Collection Actions: 11.5.3.5 Juvenile Restitution Owed by Parents

Courts generally hold that juvenile criminal justice debt owed by parents is dischargeable in a chapter 7 bankruptcy. Courts focus primarily on two factors—the action’s non-penal nature and the fact that the obligated parents are not the culpable actor.331 The Ninth Circuit has also rejected the argument that the costs of a juvenile’s incarceration charged to a legal guardian are excepted from discharge as a domestic support obligation.332

Collection Actions: 11.5.3.6 Differentiating Between Various Types of Costs

Until recently, the underlying purpose of a particular cost has rarely been a substantial part of chapter 7 dischargeability analysis. A wide variety of fees and costs, serving many different purposes and paying many different entities, are often lumped together when reviewed for nondischargeability.

Collection Actions: 11.5.3.7 Costs of Prosecution and Indigent Defense Fees

“Costs of prosecution” is a loose term that can include many different amounts chargeable to a defendant, including but not limited to transcripts, depositions, and mileage for witnesses and prosecution staff. When included in the restitution order itself, courts have generally found the costs to be excepted from discharge,340 but when the fees are imposed outside of the restitution order, they are generally dischargeable.341

Collection Actions: 11.5.3.8 Costs of Incarceration

Most courts find jail fees to be nondischargeable in a chapter 7 bankruptcy.345 In general, such fees are nondischargeable whether the costs of incarceration are calculated on a flat periodic rate for room and board or assessed on individualized bases—for example, administrative penalties covering costs for an inmate’s failed suicide attempt,346 destroyed prison property,347 or costs associated with an attempted escape.

Collection Actions: 11.5.3.9 Costs Related to Deferred Judgment

In many criminal sentencing systems, an option exists for the deferred adjudication of a criminal proceeding. In these cases, what is “deferred” is the actual finding of guilt by the court; typically, the defendant pleads guilty and submits to probation and payment of certain costs, and at the end of the term of probation the matter may even be expunged.

Collection Actions: 11.5.3.10 Surcharges

Most if not all states charge, in addition to wholly punitive fines, various surcharges that essentially amount to additional fines earmarked to fund specific initiatives. Whether discharge is permitted varies from jurisdiction to jurisdiction.

Collection Actions: 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.354 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.

Collection Actions: 11.5.3.12 Interest and Collection Costs

Interest on criminal justice debt has generally been found to be dischargeable only to the extent the underlying debt is dischargeable.360 Flowing from this, to the extent interest is generated upon an indigent defense fee balance that is dischargeable, the interest should also be dischargeable.

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.