The short answer is it depends.
Government fines, fees, penalties, and costs are those that may be imposed by:
- any agency of government (like the Division of Motor Vehicles or the IRS),
- any level of government (such as county, state, or federal), and of course,
- any level of the court system, both state and federal.
A general rule of thumb: when the government entity issued the fine as a punishment, it is likely not dischargeable in bankruptcy. When the government entity issued the fine to compensate for financial loss, then it likely is dischargeable.
What Fines Can Not Be Wiped Out in Bankruptcy?
The classification of the fine depends upon state law, and your bankruptcy attorney can help you with that. In general, fines and fees related to these are likely not dischargeable:
- Criminal misdemeanors
- Criminal felonies
- Restitution to a victim of crime
- Bad check fees
- Traffic tickets issued for crimes
- Any other costs or fees included in a sentence related to a criminal conviction
Which Fines Can Be Cleared in Bankruptcy?
- Bail Bond Forfeitures
- Parking or Traffic tickets, as long as non-criminal under state law
- Any fine imposed as reimbursement due to something you’ve done
- Court costs and fees not related to a criminal proceeding
These Fines May or May Not Be Discharged In Bankruptcy
Whether fines imposed for the following are dischargeable varies widely state-to-state:
- Fines for building code violations
- Fines for contempt of court
- Unpaid tolls and toll violations
Eliminating Income Tax Debts and Penalties in Bankruptcy
In the Bankruptcy Code, income tax debts and penalties are treated separately from other types of government penalties. In general, if the tax was due less than three years ago, the tax and the penalty will not be discharged. If the tax was due more than three years ago, the tax and the penalty may be discharged under certain conditions.
Dischargeability also depends on whether or when you filed a tax return for the year due and whether or when the IRS assessed that income tax debt. The rules are pretty complex and you should consult with an experienced bankruptcy attorney who can assess your tax situation in particular.
Fines and Penalties in a Chapter 13 Bankruptcy
Government Fines and Penalties Imposed Due to Fraud
Fines and penalties imposed due to fraud are not dischargeable in a Chapter 7 case. However, they may be dischargeable in a Chapter 13 case, as long as those penalties are included in the Chapter 13 Plan and not imposed as part of a criminal sentence. Each case must be carefully looked at and you need to ask a bankruptcy attorney regarding your specific situation.
What To Do if You Cannot Afford to Pay Your Fines and Fees
Filing a Chapter 13 petition also can give you additional time to pay off fees that are non-dischargeable. When you file you will propose to pay off that debt over a three year to five-year repayment plan. If you can prove you have the income to pay the monthly plan payments, the court will likely confirm your plan.
Filing Chapter 13 Can Help You Get Your Driver’s License Back
One more benefit of filing Chapter 13 Bankruptcy: if you lost your driver’s license due to failure to pay fines, some states will allow you to get your license back if you can demonstrate that the fines are being paid in full through your Chapter 13 plan.
Filing Bankruptcy Can Help You Even If Your Fines Are Not Dischargeable
This article is not meant as legal advice. Instead, it is meant to let you know generally what type of court and other government fines, fees, penalties, and costs are likely dischargeable and what type are probably not.
Filing bankruptcy could result in either getting that government debt discharged, allowing you to pay off that debt over time, or having your other unsecured debt discharged so you can afford to pay the government debt. In any of these three scenarios, bankruptcy offers you a fresh start.