Restitution and Bankruptcy

September 21st, 2009 by Reed Allmand

Restitution can be discharged in bankruptcy, but chances are it can’t be part of a criminal ruling.

If your first question is, “What is restitution?”  Here’s an explanation.  If you cause harm to someone or their property, a court can make you pay the person damages.  What this means is, if you egg someone’s house and it causes damages a court could force you to pay restitution to the person.  Where it gets tricky is if the restitution was opposed as part of a criminal conviction or not.  If it was part of a criminal conviction, it is treated the same as a criminal fine.  In which case, it is most likely not dischargeable.

In the book, Personal Bankruptcy for Dummies, it gives a good explanation of how restitution is treated in bankruptcy.  The book says:

“Say, for example, you’re convicted of vandalism in a criminal court and ordered to compensate the victim for damages as part of your sentence.  This kind of obligation isn’t dischargeable in a Chapter 7 or a Chapter 13.  On the other hand, if criminal charges weren’t brought against you, but the victim sued you and obtained a judgment, that kind of obligation would not be excepted from discharge (non-dischargeable) as ‘restitution.’  However, it may be non-dischargeable in a Chapter 7 on the basis of fraud, willful and malicious conduct, or embezzlement.  Still, you may be able to discharge the claim in a Chapter 13.”

As you can see restitution is a complicated subject matter in bankruptcy.  If you’re thinking there a lot of ins and outs of bankruptcy, you’re right.  Each piece of subject matter in bankruptcy gets complicated.  The type of bankruptcy to file, is something dischargeable or not, and when should someone file are all good examples of complicated aspects of bankruptcy.  The important thing to know is that you need an expert on your side.  If you are considering bankruptcy, you need to contact a bankruptcy attorney as soon as possible.  They will be able to help you make and time all of your important decisions to get back on track as quickly as possible.

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About Reed Allmand

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Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."

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