One thing you should know if you’re thinking about filing bankruptcy to eliminate your debts is that bankruptcy can’t get rid of all kinds of debts. For example, one type of debt that cannot be eliminated is court restitution. Restitution typically arises after someone has been arrested and a criminal court imposes as punishment, although restitution can also be imposed by a civil court. It’s important to clarify that restitution is generally different than someone getting judgment against you in a civil court.
There is an exception, in Colorado at least, for court restitution that arose when someone was a minor. In 2006, the 10th Circuit Court of Appeals held that since restitution imposed on someone as a minor is not punitive in nature, that debt can also be discharged, notwithstanding the provisions of Section 1328(a)(3) of the Bankruptcy Code.
In In re Sweeney, the debtor had been arrested and convicted as a juvenile when he was twelve for arson for which the court imposed $85,000 in restitution. When, as an adult, he filed Chapter 13 bankruptcy he included the restitution as a potentially dischargeable debt. In response, the Colorado Judicial Department filed an adversary proceeding seeking the bankruptcy court’s ruling that the restitution was not dischargeable.
Although the bankruptcy court sided with the CJD and ruled the restitution non-dischargeable, the issue was appealed to the 10th Circuit Bankruptcy Appellate Panel, which reversed the court. The CJD appealed the issue to the 10th Circuit Court of Appeals.
Relying on its earlier opinions that held that juvenile delinquency is a “an adjudication of status – not a criminal convicition,” the Court of Appeals held that Sweeney’s restitution was dischargeable.
You can read the court’s opinion here.
If you have any questions about whether you can get rid of certain debts in bankruptcy, please come in for a free, no-obligation consultation with an experienced bankruptcy lawyer. You can make an appointment by calling 303.331.3403 or by using our online scheduling system.