Although You Can’t Discharge (Write Off) Debts Arising from a Criminal Conviction, Still Consider the Benefits of Bankruptcy
Feb. 2, 2015
Filing bankruptcy can let you 1) write off debts so you can focus on defense costs, 2) pay your important debts, and 3) avoid related civil liability.
Criminal fines, fees and restitution—any financial obligations related to a criminal conviction—are not discharged through any kind of bankruptcy case. And unlike civil lawsuits, criminal proceedings are not “stayed”—stopped or slowed down—when you file a bankruptcy case. But if you are facing a serious criminal charge, bankruptcy can still be the best way to deal with the financial fallout.
If you are charged with a crime, you need money to pay for your legal defense. And candidly, you need to be able to focus mentally and emotionally on fighting the criminal charge, which is extremely hard to do if you are battling creditors at the same time. And then once your criminal proceeding is over, if you didn’t get a full acquittal of the charges, you will need to have the ability to pay whatever criminal fines, restitution, and/or other court and probation fees that you will be required to pay as part of your criminal sentence.
So when you are charged with a serious crime you have to make some tough choices about your financial priorities. Because of the grave risks to your freedom and reputation, you would probably be wise to pay for a defense attorney, unless you qualify for a public defender. Beyond an attorney’s fees, you need to do all you can to pay whatever the criminal court requires that you pay, often as condition for avoiding jail time. Bankruptcy can help by re-prioritizing your debts and expenses, and protecting you from your regular creditors.
1) Discharging Other Debts
Bankruptcy can likely discharge all of your non-criminal debts—or at least most of them—so that you can focus both your money and your attention on the criminal case against you, and then on fulfilling the financial terms of any conviction.
If you anticipate being charged with a crime, or right after you are charged, your highest priority should be to find and retain an attorney to defend you. Immediately find out if you qualify for a public defender, and if so then decide whether you are willing to rely on his or her services—some believe that public defenders are just too overworked and stretched too thin to provide an adequate defense. Even if you use a public defender you will likely lose time from work and so have less income, or you may even lose your job. And if you hire a private criminal attorney, you need to find a way to pay for him/her and the related costs of your defense. Either way, you will need to do what is possible to minimize your expenses and debt payments.
That may mean selling assets, and/or surrendering collateral to creditors, like a vehicle with high monthly payments. And it may mean stopping payments to all or most of your creditors.
And after your criminal case is resolved, especially if you had to serve time in jail or prison, you will probably have had a gap in your income, or will now have a job with lower income. You often have continuing financial obligations to the criminal justice system that you absolutely must honor in order to avoid incarceration. These obligations can be very difficult to keep on top of. They can include paying restitution to the crime victim(s), probation and/or supervision fees, mental health treatment costs, community service fees, and/or chemical and electronic monitoring charges.
Filing bankruptcy can clean up your debts so you can pay these costs of your criminal conviction or plea bargain. You absolutely need to avoid some creditor garnishing your wages or bank account so that you can’t meet your obligations to the criminal court.
2) Prioritize Your Debts and Expenses
Bankruptcy helps you to keep paying debts and expenses that are crucial to pay because of the criminal conviction against you.
As part of a plea bargain or conviction, criminal courts can impose requirements that you keep current on certain specific debts or expenses. For example, you may be required to always maintain vehicle insurance with a vehicular manslaughter conviction, or to pay income taxes on time with a tax evasion case. Filing bankruptcy to streamline your finances can enable you to fulfill such absolute obligations.
Also, your criminal sentence or terms of probation often require you to attend certain scheduled events—to fulfill your community service, go to probation appointments, or just maintain regular employment—again with the risk of further incarceration if you don’t do so. These require reliable transportation. If you can’t make your vehicle loan payments or pay for vehicle insurance, or at least pay for public transportation, you will not be able to meet these conditions. Filing bankruptcy may be the best way to have the means to pay for these necessities.
3) Discourage Related Civil Lawsuits Against You
If you are accused and/or convicted of a criminal offense, you may also be sued by somebody damaged by your allegedly criminal behavior. If you file bankruptcy to deal with the financial issues discussed above, this may also persuade that person from filing a lawsuit against you. Or it could lead to a quicker settlement if the lawsuit was filed ahead of your bankruptcy.
It is true that certain kinds of claims related to personal injuries or financial damages allegedly caused by your alleged behavior may be difficult to discharge in bankruptcy. For example, you generally can’t discharge claims for certain kinds of intentional behavior, or driving while intoxicated. But still, a bankruptcy may still help for the following practical reasons:
a. When you file a bankruptcy, you provide facts about your financial circumstances, in writing and orally, under penalty of perjury. Although part of you may not like that kind of self-disclosure, it can have the advantage of showing in a convincing way that you are not financially worth suing. It may be worthwhile if it convinces the person—or more importantly his or her lawyer—that chasing you is a waste of time and money.
b. The claim against you may be able to be written off in bankruptcy, or there may be enough of a risk that it would be. That would make anybody hesitate before investing a lot into a lawsuit against you.
c. In bankruptcy, the other person often has a very short amount of time to decide whether to pursue a claim against you. Some may simply miss the quick deadline. If you gave them appropriate notice of the bankruptcy case, that would be the end of the case against you. Or even if that deadline isn’t missed, litigation moves relatively quickly in bankruptcy court, which often encourages a quicker and cheaper settlement.
Whether filing bankruptcy will give you these kinds of advantages is a very delicate tactical question that turns on the specifics of your case. It needs to be very carefully discussed with your lawyer. But it’s a conversation that is very much worth having.