Monthly Archives: October 2017

Can I settle a debt with my judgment creditor without going bankrupt? (satisfaction of judgment)

Yes.  And although I hate saying it, if there is a way you can settle your debts and stay out of bankruptcy, then you should take it.  Your credit will be better in the long run.

I had a potential client who had $1,500 cash in hand ready to file a chapter 7 case.  I was more than ready to take his money.  Then he had an idea:  he would call his largest creditor and see if that creditor would take that same $1,500 to settle out a much large judgment claim.  

Fortunately for the client, the creditor accepted the offer.  Because of this settlement, my potential client didn’t need to file bankruptcy.

Now the creditor had sued my client and already had a judgment.  Not only was this hurting my client’s credit, but he was worried that this creditor would take the settlement money and then still proceed to garnishment.  In order to protect my client, he drafted up a Judgment Settlement Agreement (copied from a web search), and brought it to my office along with a cashier’s check to settle the debt.

Because there was a judgment entered, my client also needed a Satisfaction of Small Claims Judgment (found here: ).

Both parties signed the agreement, the plaintiff signed the Satisfaction of Judgment, everything was notarized, and we filed the Satisfaction with the court.

At that point, the judgment was satisfied, the creditor could no longer collect, and my client avoided bankruptcy.

Can I get rid of criminal restitution in bankruptcy?

Nope.  (And to be honest, you probably expected this answer).  

I get asked this question at least a month, and the answer is always a resounding “No.”

If you don’t know what criminal restitution, be grateful.  Let’s say that you have a very bad day and burn down the storage unit where you and your ex-husband used to keep all of your Christmas decorations.  This is arson.  After you are criminally charged and sentenced, the court will order you to pay various fines and even pay to restore the storage unit.  In this scenario, the amount is $20,000 in total.  Then you’ll have $20,000 in criminal restitution.  You’ll have to get on a payment plan with the state to pay that back.

When you file bankruptcy, it does NOT affect your restitution.  In some jurisdictions, you can organize those payments in a Chapter 13 bankruptcy, but here in Utah, the Chapter 13 Trustee does not want to be in charge of collecting and paying those each month.

If you are looking for the official bankruptcy code sections, you can go here:

11 U.S. Code § 523 – Exceptions to discharge

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt

(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit,

If you need case law, it is clear as well.  The U.S. Supreme Court found in Kelly v. Robinson, 479 U.S. 36 (1986) that criminal restitution payments cannot be discharged in bankruptcy.

You will want to get on a payment plan with the state and stick to it.  This doesn’t mean that we cannot go bk and discharge your other debts like medical and credit collections.