There are some debts that bankruptcy does not affect. You can file bankruptcy to help relieve the burden of credit card and loan debts, medical bills, back utilities and rent, and so forth.
But some debts are “immune” from a bankruptcy discharge – the word is “non-dischargeable”. This means that when the smoke clears and the bankruptcy is over, these debts will still have to be paid
My previous blog I talked about taxes. Now I’ll tell you about fines and fees owed to the city, county, state and/or federal government.
The title lists the bulk of them: traffic fines, speeding tickets, any non-moving violation fines, and so on. It boils down to this: if you were ordered to pay in a criminal court, there is a VERY good chance it will survive bankruptcy.
The bankruptcy law says if the debt is “…a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss” it is non-dischargeable.
This of course includes fines and court costs. But what about related non-court costs?
If I still owe for my DUI counselling sessions required as part of my sentence? It may depend on your jurisdiction, but I’ll bet you a doughnut those will survive where you live. It was still ordered as part of the DUI sentencing “package”. If the county (or the counselling company) challenges the dischargeability of the debt before the bankruptcy court, odds are the judge will not let it discharge. And not just alcohol counselling – any court-ordered counselling or valuation ordered by a criminal court and part of the Order counts here. This is part of their Police Powers. If nothing else, paying these debts is part of your probation and NO bankruptcy judge is going to hold a county liable for violation of the stay as to probation requirements.
If I don’t mow my lawn and I get a citation from the city? It survives. It’s a penalty payable to a governmental unit; part of their police powers.
How about library fines? What if I never returned the first Harry Potter book back in 1997 and now owe $6,000.00 to my local library? Those CAN discharge – libraries are not governmental units. BUT they CAN refuse to give you a library card until the fine is paid. You cannot force them to take you as a patron. (Also most libraries’ fines only go as high as the cost of replacing the book. HUGE library fines mostly only exist on situation comedies…). Lost material charges? I believe that goes under pecuniary loss.
An “actual pecuniary loss” is money compensation such as overpayment of public aid, etc. THAT kind of debt is dischargeable, but there are ways the city/county/state/federal government can get their money back – I’ll explain that in another blog.
But check with your local bankruptcy attorney and local library system! Some libraries prosecute for lost books and back fines owed. This may change its eligibility for discharge. But even if the bankruptcy court declares the debt dischargeable – it is likely the library won’t let you check out any more books until paid.
How about back utilities? Those discharge because it is a pecuniary loss – money owed, not a fine. If you file bankruptcy on your utility bill the utility company – even municipal companies – cannot refuse you service. All they can do is charge you a new deposit.
And it must be a reasonable deposit. If we are both in line at the electric company they cannot charge you a $400.00 deposit and me a $1,500.00 deposit because I filed bankruptcy. They can charge us both a $1,500.00 deposit – they can be crooks as long as they are fair crooks to everyone.
I am talking about municipal utility companies – electric, water-sewer-trash, gas, etc. Cell phone, land lines, cable or satellite services are NOT considered utilities. Those companies CAN refuse you service even after discharge until the debt is paid. The theory is (believe it or not), you can do without cable or a telephone. You can’t do without electricity. And you can find another company to provide you with a cell phone or HBO. You do not HAVE to use the company filed in your bankruptcy.
In some areas of the country it is the same with gas (propane) and trash. If there are several trash pick-up services in a city or village – if you CAN go somewhere else to get (give?) your trash – they can refuse you service until paid in full, too. A good local bankruptcy attorney will have the experience and knowledge of your area to help advise what the local library, trash company or electric company will do when you list them in your bankruptcy.
What if you surrender your house and it has a HUD loan? Isn’t that a governmental unit? Yes, but this is the very definition of a “Pecuniary Loss”. If the government is going to be in the home loan business, then it must abide by the discharge injunction and write off the debt!
How are these debts affected by a Chapter 13 repayment plan? It depends on your jurisdiction. In some cases you can list the fines and these other debts and pay them over the life of the Plan. Other jurisdictions avoid these debts and allow you to pay them directly. This subjects you to “pay or appear” dates. If you have to show up in your county court to show that you did or did not pay the fine/fee/etc., bankruptcy filing will not prevent it. Talk to your local bankruptcy attorney.
Some clients do not have a problem with these kinds of debt surviving their bankruptcy. “I can handle the fines if you can get these credit cards off my back.” You may be asked to sign an acknowledgment saying that you understand that. Read through any acknowledgement, but don’t be too offended by it. The attorney is only protecting himself or herself – this is his or her proof that they DID discuss it with you.
I’ll discuss more debts that are non-dischargeable next time.
Copyright 2016 Michael Curry
About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.
He is also the author of books on finance and bankruptcy available on Kindle through Amazon!
Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!
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