Sunday, May 27, 2012

Is restitution ordered in a DUI accident dischargeable in bankruptcy?

The question is frequently posed.  What if I am ordered to pay restitution to a victim in a DUI accident but I later file for Bankruptcy, will I have to pay the money? Under California DUI Law, the Bankruptcy Code does not apply to restitution orders. A restitution obligation imposed as a condition of probation is not dischargeable in a liquidation or “straight bankruptcy” proceeding under Chapter 7  Federal Bankruptcy laws. In fact, Courts have found that Civil restitution judgments originally imposed as a condition of debtor’s probation are not dischargeable under Chapter 7 bankruptcy proceedings. Nor is a restitution obligation dischargeable under Chapter 13 (11 USC §§1301 et seq). 11 USC §1328(a)(3). Bankruptcy does not block restitution even when a criminal defendant’s civil obligations to the victim were discharged by bankruptcy before criminal charges were filed. Because collection of restitution is a continuation of a criminal action, the automatic stay provisions of bankruptcy law do not apply. In one recent Court case the Judge found that the automatic stay did not enjoin state court criminal proceedings against debtor for failure to pay child support, according to the relevent law set forth in 11 USC §362(b)(1).

What if the victim in the case declares bankruptcy?  When the victim incurred an obligation to a third party as a result of defendant’s conduct, the bankruptcy discharge of the victim’s obligation does not preclude a restitution order. Indeed, it has been found that the bankruptcy is economic loss despite discharge; no explanation why loss is equal to amount of obligation.