Many people are under the mistaken impression that debts incurred from criminal cases can not be discharged in bankruptcy. While that’s true of some criminal debts, it’s not true of several types of debt often assessed against people who have committed or are alleged to have committed a misdemeanor or felony. State and local governments use a multitude of court fees and costs to pay for services. In some jurisdictions, court debt accounts for a large percentage of their general fund income. This court debt often impacts minority and low income populations the hardest so using bankruptcy to eliminate the debt is an important tool in helping them gain a fresh start.
The bankruptcy code says a fine, penalty or forfeiture cannot be discharged in bankruptcy if it is payable to and for the benefit of a governmental unit and is punitive rather than compensatory. How all of those words are defined is what makes it possible to discharge some costs and fees resulting from criminal cases. For example, the following types of court debt have been ruled dischargeable by some bankruptcy courts:
- service fees imposed on uninsured motorists to pay administrative expenses
- collection costs related to state criminal fines
- probation supervision fees
- jail fees and other costs for incarceration before trial
- bail bond debts owed to a bondsman
On the other hand, the following types of court debt have usually been found to be nondischargeable in Chapter 7 bankruptcy:
- restitution ordered to be paid to compensate victims of crimes
- costs and fees included in restitution or sentencing orders
- court costs arising from a criminal conviction payable to the state
- jail fees incurred after a conviction of a crime
- bail bond debts owed to a court
When faced with criminal or court debts it’s important to examine each debt, cost or fee in isolation to see if it can be discharged in Chapter 7 bankruptcy. Even eliminating a portion of someone’s total court debt can be useful to gaining a fresh start.