Monday, June 17, 2013

Court Holds Criminal Restitution Trumps Bankruptcy Automatic Stay Against Debtor and Bankruptcy Estate (6/17/13)

In United States v. Robinson, 2013 U.S. Dist. LEXIS 83915 (WD TN 6/14/13), here, the District Court, reversing the Bankruptcy Court, held that criminal restitution trumps the bankruptcy automatic stay, so that criminal restitution could be collected from the bankrupt and the bankruptcy estate.  The case does not involve restitution for taxes, but the principal would apply to restitution for taxes.  Restitution for taxes, of course, would not be dischargeable in bankruptcy, but here the question is whether the restitution is collectible more quickly than indefinitely, if at all, in the future simply because the restitution was not discharged.  The opinion is very well reasoned, and that is the reason I offer it here.  I commend it to readers desiring to pursue the issue of the interface of criminal restitution and bankruptcy and quote here just the two final paragraphs:
To the extent the Bankruptcy Court held that the criminal actions and proceedings exception allowed the United States to enforce a criminal fine or restitution order as against the debtor in bankruptcy (or his property) personally, the Court agrees. Where the Bankruptcy Court found public policy mandated the protection of property of the bankruptcy estate as against the United States government when continuing a criminal action, the Court believes the Bankruptcy Court struck the wrong balance. Section 3613(a) provides a clear congressional mandate: despite the operation of other law, the United States must be able to enforce criminal fines and restitution orders against the property of criminal defendants ordered to pay them. Congress, in enacting the Bankruptcy Code, noted that it did not intend the Bankruptcy Code to interfere with the swift and sure operation of justice. In light of these Congressional statements of public policy, the Court cannot agree with the Bankruptcy Court that public policy now demands it allow a criminal defendant, adjudged guilty in a competent court and ordered to pay restitution, to delay justice by taking refuge under the Bankruptcy Code. 
Because the Court finds Congress' plain language indicates it intended § 3613(a) to sweep aside the protections of the Bankruptcy Code, the Court determines the United States may enforce its restitution orders against Robinson's property, whether nominally held by Robinson or Robinson's bankruptcy estate. Therefore, the Court VACATES the portions of the Bankruptcy Court's Order inconsistent with this Order, and REMANDS this case to the Bankruptcy Court for further proceedings. 

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