June 4, 2017

Background:

  • Debtor was convicted of stealing money from his employers.
  • Restitution was set at $196,691.
  • Debtor filed for Chapter 7 Bankruptcy.
  • Employer filed an adversary proceeding since the Debtor was trying to discharge the restitution obligation.
  • The Debtor admitted he was charged with and pleaded guilty to criminal theft and ordered to pay restitution.
  • Debtor denied that the Restitution Order was non-dischargeable.
  • Debtor appealed Bankruptcy Court’s ruling that the debt was non-dischargeable.

Appellate Court Ruling

  • Bankruptcy courts should not invalidate the results of state criminal proceedings.
  • The Restitution Order focused on punishment and rehabilitation and is clearly within the meaning of Section 523(a) (7) of the Bankruptcy Code.
  • RESTITUTION ORDER WAS NOT DISCHARGEABLE.