Can I Discharge (Eliminate) Government Fines in Bankruptcy?

Whether you can discharge a government fine, penalty or ticket in bankruptcy depends on the reason the penalty was imposed. As a general rule with respect to fines and court costs in criminal cases, fines issued against a Debtor as a punishment are not dischargeable in either a Chapter 7 or Chapter 13. These non-dischargeable debts usually include fines in a criminal sentencing order or restitution set out in a criminal sentencing order.

The Label Doesn’t Matter

The Bankruptcy Code refers to government fines as either: fines, penalties, forfeitures, tickets, tolls and surcharges. The government unit can be a municipal, state, federal entity. For instance, if a penalty is imposed by the Utah Department of Workforce Services for unemployment benefit overpayments based on bad faith or fraud, that penalty is also non-dischargeable. What a fine or penalty is called does not determine whether it is dischargeable in a Chapter 7 or 13 bankruptcy case.

When Can You Discharge a Fine or Penalty?

You can’t discharge a fine in bankruptcy if the fine is penal in nature. In other words, if the fine is intended to punish you for wrongdoing, that fine is non-dischargeable. On the other hand, if the fine is intended designed to compensate the government for monetary loss, you can discharge that debt in bankruptcy.

For example: You are driving under the influence and you lose control of your car and knock over several yards of highway barrier. You will receive two fines: the ticket for the DUI and a notice of collection from the Utah Department of Transportation for the cost of replacing the barriers. The first fine for the DUI would be non-dischargeable because it is intended to punish you for breaking the law. The second fine for replacing the barriers would likely be dischargeable because it is designed to compensate UDOT for the cost of repairs.

Fines and Penalties You May Want to Discharge in Bankruptcy

Below are some fines and penalties that many bankruptcy filers wish to discharge. In some cases, it may be difficult to know whether the fine is penal or compensatory in nature. It may depend on the jurisdiction, and even then, experts may disagree as to whether the fine is dischargeable or not. If you want to discharge a fine in bankruptcy, call me to discuss the likelihood.

• Bad check fees. Because these generally arise through criminal or civil fraud, they are usually non-dischargeable.
• Criminal restitution fees. These are usually non-dischargeable. Even though the use of the word “restitution” makes it sound as if the victim is being compensated, the U.S. Supreme Court has made it clear that restitution is penal in nature.
• Income tax penalties. Bankruptcy law treats tax penalties separately from other types of penalties. If the tax itself is less than three tax years old, the tax and the penalty are non-dischargeable. If the tax is more than three years old, it is dischargeable.
• Fines for building code violations. These are generally considered to be criminal in nature and non-dischargeable.
• Fines for contempt of court. These are generally non-dischargeable, although some experts argue that a civil contempt of court fine, which the court imposes for your failure to abide by a court order, is dischargeable.
• Bail bond forfeitures. These are usually dischargeable.

Fines in Chapter 7 v. Chapter 13

Many fines and penalties that cannot be discharged in a Chapter 7 case can be discharged in a Chapter 13 case. These include fines for traffic violations, parking tickets, building code violations, and toll charges.

However, there are some fines that you cannot discharge in Chapter 13, such as those that are included in a sentence for criminal conviction. For example, you would not be able to discharge a fine imposed by a court as part of a conviction for a drug offense or robbing a convenience store.