When someone is convicted of theft, one of the court’s requirements is often restitution to the victim. Restitution is meant to compensate for losses caused by the crime, and it can involve significant amounts of money. While bankruptcy can be a powerful tool for managing financial hardship, it has specific rules about what types of debts can be discharged. A theft crimes lawyer can attest that the answer is often more complex than people expect. It depends on the type of bankruptcy filed, the nature of the restitution, and federal bankruptcy law.
How Bankruptcy Treats Criminal Restitution
Under federal bankruptcy law, certain debts are considered non-dischargeable, meaning they cannot be wiped out through bankruptcy. Criminal restitution is one of these debts. Whether the restitution stems from a felony, misdemeanor, or juvenile case, the court-ordered payment is treated as part of the sentence. This means that even after filing for bankruptcy, the obligation to pay restitution will remain.
This rule applies to both Chapter 7 and Chapter 13 bankruptcy. In Chapter 7, most unsecured debts, such as credit card balances and medical bills, can be discharged, but criminal restitution survives the process. In Chapter 13, while the repayment plan may restructure other debts, restitution payments must still be made in full during and after the plan period.
Why Restitution Cannot Be Discharged
Restitution is considered part of the criminal justice system’s effort to hold offenders accountable. It is not treated like a standard debt owed to a private creditor but rather as a penalty intended to address harm done to a victim. Federal bankruptcy laws prioritize this obligation above other debts, which is why it remains unaffected by discharge.
This policy serves two purposes. First, it reinforces the idea that criminal penalties cannot be avoided through financial maneuvers. Second, it ensures that victims receive the compensation the court has ordered. While this may be frustrating for those in financial trouble, it reflects a broader principle in both criminal and bankruptcy law.
Ways Bankruptcy Can Still Provide Relief
Even though restitution itself cannot be discharged, bankruptcy can still be helpful in other ways. Many people struggling with restitution are also dealing with high-interest credit cards, medical bills, personal loans, or business debts. Filing for bankruptcy can eliminate or reduce these other obligations, freeing up more income to apply toward restitution payments.
Other Considerations Before Filing
It is important to understand how filing for bankruptcy could affect other aspects of your financial and legal situation. While it will not erase restitution, it may impact your ability to pay fines, interest, and costs associated with your case. Additionally, the bankruptcy process will require full disclosure of all debts, assets, and income, which may affect ongoing court proceedings.
Seeking legal guidance from a bankruptcy attorney familiar with both criminal defense can help you assess your options. Experienced legal professionals can review your debts, income, and obligations to determine whether bankruptcy could provide enough relief to make restitution payments more manageable.
Moving Forward
Restitution from a theft conviction is a unique type of debt that bankruptcy law does not discharge. However, bankruptcy can still be a valuable tool for reducing or eliminating other financial burdens, making it easier to meet restitution requirements. The right approach will depend on your overall financial picture and the specifics of your case.
If you are facing significant debt and a restitution order, it is advisable to discuss your options with a qualified attorney. Our friends at Stechschulte Nell discuss this topic often and can help you understand how bankruptcy laws apply to your situation.