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Bankruptcy Appellate Panel Affirms Order Discharging a Former Inmate’s Incarceration-Related Costs

The United States Bankruptcy Appellate Panel for the Eighth Circuit recently released a decision affirming a lower federal bankruptcy court’s decision permitting a bankruptcy debtor to discharge a debt he owed to a county jail for incarceration costs as part of his Chapter 7 bankruptcy. Representatives of the county to which the debt was owed appealed the bankruptcy court’s ruling, but the appellate panel’s decision favored the debtor, holding that federal bankruptcy law allows the discharge of the debts. Based on the recent appellate ruling, the debt owed by the man for his incarceration costs will remain discharged, and he has no obligation to repay it.

Jail FenceThe Debtor Attempts to Discharge a $3,500 Debt for Incarceration Expenses Through Bankruptcy

The debtor in the case of County of Dakota v. Milan was a man who sought debt relief through a Chapter 7 bankruptcy proceeding in 2014. Among other debts and obligations, the debtor requested the discharge of a $3,500 debt that he owed to the appellant, the Dakota County Sheriff’s Office, for the costs of his 179-day incarceration at the Dakota County Jail. Like many jails and prisons throughout the country, the appellant charges inmates daily fees to contribute toward the expenses of their incarceration. During the initial bankruptcy proceedings, the court ruled that the unsecured debt owed to the appellant should be discharged, leading the Sheriff’s Office to file an appeal.

The Appellate Panel Agrees that the Debt Was Pecuniary in Nature and Dischargeable

The primary issue on appeal was the application of Section 523(a)(7) of the U.S. Bankruptcy Code, which precludes the discharge of a debt for a fine, penalty, or forfeiture owed to a government unit unless it is pecuniary in nature. Dakota County argued that the debt was a fine or penalty because it was imposed as a result of the debtor’s criminal conduct. The appellate panel evaluated the laws creating prisoners’ obligations to pay toward the costs of their incarceration and ruled that the debt was not a fine, penalty, or forfeiture as defined by federal law. As a result of this finding, the appellate panel ruled that the statute cited by Dakota County should not preclude the bankruptcy court from discharging debts incurred for incarceration costs.

Debts that Initially Appear Ineligible for Discharge May Be Eligible Upon Closer Inspection

The ruling in the Milan case demonstrates the subjective nature of some of the provisions within the bankruptcy code. Many types of debts that appear to be ineligible for discharge may be construed as a dischargeable debt with the help of a skilled bankruptcy attorney. Additionally, debtors with several different kinds of debts may benefit from a bankruptcy proceeding even if some of their debts are not dischargeable. Anyone who has substantial amounts of debt and is interested in a fresh start should consult with a qualified bankruptcy attorney to discover if bankruptcy could provide a suitable resolution to their financial problems.

Should You Consult a Bankruptcy Attorney?

If you or a loved one has been struggling with what feels like an insurmountable amount of debt, bankruptcy may provide you with a pathway to financial independence. If you think that your debts are not eligible for discharge, you may be surprised by what is possible when you have a knowledgeable bankruptcy attorney handling your case. The Louisville and Southern Indiana bankruptcy attorneys at the Schwartz Bankruptcy Law Center can advise you on which debts can be discharged most easily and guide you through the process of becoming debt-free. Our bankruptcy attorneys represent clients nationwide in several types of bankruptcy proceedings. Call 866-366-3328 today or contact us through our website to schedule a risk-free consultation.

More Blog Posts:

Federal Appeals Court Allows Creditors to Seek Repayment of Expired Debt Claims Through Bankruptcy Cases, Kentucky Bankruptcy Lawyers Blog, published September 6, 2016.

Bankruptcy Debtor Fails to Justify Transfer of Farm to Her Father Before Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published August 14, 2016.

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