Chapter 13 Bankruptcy Makes Paying Criminal Restitution Much Easier. Here's How It Can Help You
Richard Fonfrias, J.D.
Chicago's Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
As part of the punishment for a criminal offense, courts often order restitution. And while you cannot erase restitution in bankruptcy, you can take advantage of the bankruptcy laws so you can comfortably pay your restitution and support your family at the same time.
Take Up To 5 Years To Pay Criminal Restitution
If you have a regular monthly income, you can file a chapter 13 bankruptcy, which helps you get caught up on your bills. Chapter 13 allows you to set up a repayment plan of up to 5 years. The amount you pay each month takes into account your income, expenses, and payment to the Chapter 13 bankruptcy trustee for distribution to your creditors. At the end of that period, any balances that remain are usually discharged by the court. This, however, does not apply to restitution, which you are required to pay in full.
The purpose of Chapter 13 bankruptcy is to allow you to get a fresh start, get caught up on past-due bills to creditors, and support your family, without the bankruptcy making a huge impact on your daily life. While you're in Chapter 13, the government cannot take your income or assets to pay your court-ordered restitution.
You Pay Bills By Their Legal Priority
The U.S. Bankruptcy Code requires that debts be paid by a specific legal priority, based on what is fair to creditors of equal standing. The highest priority debts are those to secured creditors. The lowest priority are unsecured claims, such as credit cards bills, retail store accounts and medical bills. Court-ordered restitution is in this unsecured category and it cannot be paid ahead of other unsecured claims. The Bankruptcy Code does not permit the bankruptcy court to change the priority of obligations.
Not Paid Off? File Chapter 13 Bankruptcy Again
If you find that you will not be able to completely repay criminal restitution during a single 5-year payment period, then talk with your bankruptcy attorney about filing Chapter 13 more than once.
Under this scenario, you would make your Chapter 13 payments for the first 5 years. Then you would file again, at the end of the first 5 years, and continue to make Chapter 13 payments for the remaining period. This allows you to set up a longer payment plan than you could under a single bankruptcy.
As always, you should talk with your bankruptcy lawyer to see if paying criminal restitution under one or two Chapter 13 bankruptcies makes sense in your situation. Bankruptcy law and the rules surrounding bankruptcy can be complex. Hiring a skilled bankruptcy lawyer to represent your interests is your best course of action.