by UPDATE: The Fourth Circuit has since issued a decision on this case. Click here to read our article discussing their ruling.
The Fourth Circuit is considering whether restitution included in a “probation before judgment” is non-dischargeable in Chapter 13 under 11 U.S.C. §1328 (a)(3). Section 1328(a)(3) provides that “the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt— … for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime.” This is an appeal from the District Court in Feyijinmi v. Md. Cent. Collection Unit, Civil Action No. RDB-22-00904, 2022 U.S. Dist. LEXIS 198970 (D. Md. Nov. 1, 2022).
In 2006 the Debtor was found guilty of welfare fraud and sentenced to probation before judgment and ordered to pay restitution for $7,275.33. In 2014 the Debtor filed a Chapter 13 bankruptcy and received a discharge on February 26, 2020. Post-discharge the creditor notified the Debtor that she had an outstanding debt for the restitution and that they may intercept her tax refund.
The Debtor then filed a motion to reopen the bankruptcy and filed a complaint to determine whether the restitution was discharged. The bankruptcy court held that the debt was non-dischargeable and was affirmed by the district court. The court held
“The central fact is whether there is an implication of guilt. In Wilson, the court determined that probation before judgment following a guilty plea constituted a finding of guilt necessary to categorize the debtor’s restitution as attached to a criminal conviction. Here, the Appellant was found guilty, which squarely implies guilt sufficient to attach her restitution to a criminal conviction under 11 U.S.C. § 1328(a)(3). The appellant’s argument raises a distinction without a difference. Therefore, the Appellant’s probation before judgment following a finding of guilt constitutes a criminal conviction under 11 U.S.C. § 1328(a)(3) and her restitution was non-dischargeable.” Feyijinmi v. Md. Cent. Collection Unit, Civil Action No. RDB-22-00904, 2022 U.S. Dist. LEXIS 198970, at *9 (D. Md. Nov. 1, 2022).
NACBA submitted an amicus brief in this case supporting the Debtor. The brief was written and submitted by Peter Goldberger of Ardmore, Pennsylvania.
The briefing, in this case, is complete and an order-setting oral argument is expected shortly.