Can Any Kind of Bankruptcy Help with My Criminal Debts?
November 23, 2009 by Oliveros & O'Brien, P.C.
Although most debts related to your alleged criminal behavior can‘t be written off in bankruptcy, there are a few exceptions that might make all the difference for you.
***
Bankruptcy does not write off criminal fines or restitution, and does not stop criminal court proceedings. But sometimes you can find yourself dealing with fallout from criminal allegations against you BEYOND the criminal court, and that is where bankruptcy may be able to give you a critical fresh start.
The district attorney’s criminal case against you may be weak, and with a good attorney you may be able to get a favorable plea agreement or possibly even have the charges dropped. A criminal case against you has to be proven “beyond a reasonable doubt.” There may not be enough evidence against you to meet that burden of proof. But once the criminal case is resolved, another pack of troubles can rear their head in civil court, in the form of a lawsuit by the alleged victim. Here is one hypothetical example that illustrates some of the ways bankruptcy can help.
Example: Accusations of assault and battery, and arson by an ex-spouse-to-be:
Let’s say you’ve been charged with domestic assault and battery, resulting from a fight the two of you had a few weeks before the divorce was final. The situation is greatly aggravated by a mysterious fire two days later which destroyed your about-to-be ex-spouse’s expensive vehicle and seriously damaged the garage and part of the house. You know nothing about the fire and believe you are being framed, by the ex-spouse or even a vengeful former love-interest trying to take advantage of the situation. With critical help from your criminal defense attorney, and thanks to conflicting stories by the witnesses, all the criminal charges are dropped.
But now your enraged ex-spouse is suing you for civil assault and battery from the fight, for severe emotional distress from the fire, and for $150,000 property damage to the vehicle and real estate. This lawsuit was filed in the same state court where you feel you were not treated fairly in the divorce. You are afraid that with a sympathetic judge and jury, you could end up owing a fortune. You know there is a much lower standard of proof against you in this civil case —“a preponderance of the evidence”— which basically means whoever has a more convincing story wins. It’s not looking good. You’re thinking about filing bankruptcy anyway because of other financial pressures. Could bankruptcy help in any way with these ex-spouse problems as well?
Bankruptcy can help in a number of possible ways.
1. Automatic stay
If you filed a bankruptcy before this civil case went to trial, the bankruptcy case would at least stop that litigation temporarily. Your ex-spouse’s attorney would have to get permission from the bankruptcy judge to continue with the civil lawsuit, and would likely have to get help from a bankruptcy attorney to do so. That pause in the litigation, and a review of the litigation by another attorney, could be enough to have the other side re-think whether the benefits of proceeding are worth all the costs.
2. Proof of your true finances
Your ex-spouse could have second thoughts about pressing on with the litigation if he or she is convinced that you really don't have hidden assets or some other way to pay a big judgment against you. The documents you are required to file under oath in your bankruptcy case will paint a rather thorough picture of your finances. Your documents should show rather convincingly that your pockets are not very deep. Even if your ex-spouse is not convinced, this should catch the attention of his or her attorney. If for nothing other than the attorney’s self-interest, he or she will be concerned about investing too much in chasing you once you show how little you have.
3. More difficult elements for ex-spouse to prove
If the two above points are somewhat speculative, this one is much more concrete: when you file your bankruptcy, you make it harder, and some cases much harder, for your ex-spouse to win against you. He or she doesn’t just need to show that according to the law, you’ve caused damage to person and property—in other words win the state court lawsuit and get a judgment for the amount of money you owe him or her. AFTER THAT, the ex-spouse must also show that this debt you owe fits within some rather limited categories of debts that are not discharged (written off) in bankruptcy.
For example, if you file a Chapter 7 case, your actions must have been determined to have been “willful and malicious” or else the ex-spouse’s claim would be discharged. That generally means that your actions must be found to have been intentional, not just reckless. And at the same time your actions must have been done without any just cause or excuse. If you acted either recklessly or with a valid excuse, then the ex-spouse’s claims against you would likely be discharged in your Chapter 7 case.
Or perhaps of greatest help, a Chapter 13 case generally discharges debts for PROPERTY damage (but not personal bodily injury). This usually means that after paying as much as you reasonably could to ALL of your creditors for 3-to-5 years the rest of your debts would be discharged, including any for damage to the vehicle and house. If your ex-spouse’s claim for bodily injury is relatively weak and for the property damage relatively strong, a Chapter 13 case may be the best alternative. In some cases you would be paying nothing more to your creditors than if you did not owe the property damage to your ex-spouse; it would just get distributed differently.
Once your ex-spouse and his or her attorney are forced to pause in the litigation, see the truth of your finances, and realize that your bankruptcy has created an additional major hurdle to getting anything out of you, they may well decide that all their aggressive behavior is not worthwhile. And even if they keep pressing, you have likely made it harder for them to prevail against you.
Conclusion:
Bankruptcy can, in certain circumstances, create game-changing advantages for you in the criminal law-related arena. However, when you are dealing with both criminal and bankruptcy issues, you need advice from attorneys who are intimately familiar with both areas. Throw in litigation by an ex-spouse or someone else with an axe to grind against you, and the situation gets even more complex. At Oliveros and O’Brien we have worked very closely together in all these areas of law for many years. Call Greg Oliveros if you want to talk primarily about a criminal matter, call Mike O’Brien primarily about bankruptcy and creditor problems. Our phone number is 503-786-3800, or click here to send us an email.
In: Criminal Law