Financial difficulties arising from criminal proceedings are one of the many reasons why people file for bankruptcy. Removing criminal fines – or any penalties due to a government agency – can be a great way to solve a problem, but it is not always possible. Whether you can release the fine from bankruptcy will depend on why you were assessed at first. Can you file bankruptcy on court fines?
How to remove court fines in bankruptcy
Most of us know the fines resulting from road tickets. But there are also other fines such as victim restitution or building code violation assessment. Many fines do not go bankrupt – especially court fines. Here’s how you can determine if yours qualify for discharge.
The first step will be to determine if you owe a fine to a government entity. It can be one of many federal, state or municipal government organizations, or an entity acting on behalf of a government, such as a tolling authority.
You will then learn what the issuing agency hopes to achieve by assessing the fine.
Financial penalty The fines that are to punish you for some actions are not subject to bankruptcy exemption in chapter 7. For example, road tickets and refunds are a penalty for violation of the law and will not be released. In contrast, fines and penalties due to a government agency are waived in Chapter 13 bankruptcy – even if the debt was caused by fraud. However, there is an exception: you cannot be released from fines or restitution contained in a conviction in any insolvency case.
Refundable fines. Fines that require reimbursement are subject to exemption. Suppose a city sends you a notification that your overgrown lawn is violating a city code, but you are ignoring it. The city has mown for you and sends a bill (in the form of a fine). The fine is a way of recovering the cost by the city and the debt should be repaid.
Fines and penalties you may want to release from bankruptcy
Below are fines and penalties that many bankruptcies want to release. In some cases, it can be difficult to determine whether a fine is criminal or compensatory. This may depend on jurisdiction, and even then experts may disagree as to whether the fine is exempt or not. If you want to be released from a fine in bankruptcy proceedings, talk to your local bankruptcy lawyer.
- Bad check fees. Because they generally arise as a result of criminal or civil fraud, they are usually not refundable.
- Road and bridge tolls not paid. Experts differ whether unpaid tolls are charged. Some say you should be able to release unpaid tolls because they are intended to compensate the government for using a bridge or road.
- Restitution penalty fees. They can usually not be charged. Although the use of the word “restitution” makes it sound like the victim is being compensated, the US Supreme Court has explicitly stated that the restitution is criminal.
- Income tax penalties. Bankruptcy law treats tax penalties separately from other types of penalties. If the tax itself is less than three tax years, the tax and penalty are not taxable. If the tax is more than three years old, it is subject to exemption. (Learn more about paying tax debts in Chapter 7).
- Penalties for building code violations. They are generally considered criminal and are not refundable.
- Fines for contempt of court. In principle, they cannot be discredited, although some experts say that civil contempt for a court fine imposed by a court for failure to comply with a court order is subject to exemption.
- Deposit forfeiture. They are usually removable.