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Debts and discharge
Fines and penalties
In bankruptcy, fines and penalties are debts for a fine, penalty or forfeiture owed to and for the benefit of a governmental unit. A Chapter 7 discharge does not cover them unless the amount is compensation for actual money loss. 1
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The debt must be a fine, penalty or forfeiture, payable to and for the benefit of a governmental unit (the United States, a state, a municipality or their agencies), and not compensation for actual money loss. 1 2
Tax penalties follow their own rule, including penalties tied to a transaction or event more than three years before the filing. Which tax penalties survive is a question for a tax or bankruptcy professional. 1
Criminal fines and restitution included in a sentence on a conviction are not discharged in Chapter 7, and they are also left out of the discharge after a completed Chapter 13 plan. Filing does not pause the criminal case itself: the automatic stay does not stop criminal cases. 3 4
Chapter 13 is where the rules split. The discharge after a completed plan lists the debts it leaves out, and the general exception for government fines is not on that list; a Chapter 13 hardship discharge does not cover them. How a particular non-criminal fine is handled in a plan is a question for a bankruptcy lawyer. 5 1
What it covers
| Kind of debt | Chapter 7 discharge | Discharge after a completed Chapter 13 plan |
|---|---|---|
| Fine, penalty or forfeiture owed to a governmental unit, not compensation for a loss 1 5 | Not discharged 1 5 | Not on the list of debts left out 1 5 |
| Criminal fine or restitution included in a sentence 3 5 | Not discharged 3 5 | Not discharged 3 5 |
Common questions
Are traffic tickets and court fines dischargeable in bankruptcy?
Sources
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