In In re Feyijinmi, the 4th Circuit held that a debt for restitution ordered as part of a criminal conviction is nondischargeable under 11 U.S.C. § 1328(a)(3), even if the conviction was expunged or the restitution was later converted to a civil matter. Additionally, the State’s characterization of the debt on its proof of claim as “court fees” did not change its nondischargeable nature.
Facts
Dedre Feyijinmi was found guilty of welfare fraud in Maryland state court and ordered to pay $14,487 in restitution. The court deferred the entry of her conviction and placed her on probation before judgment. After completing her probation, the state expunged her criminal records but her restitution obligation remained, and it was later transferred to the State’s Central Collection Unit. Feyijinmi filed for Chapter 13 bankruptcy, and the State filed a proof of claim for the restitution debt, labeling it as “court fees.”
Analysis
The court’s legal analysis began with the interpretation of “conviction” under 11 U.S.C. § 1328(a)(3). The court applied federal law, relying on the Supreme Court’s decision in Dickerson v. New Banner Institute, Inc., which held that a guilty plea followed by probation qualifies as a conviction, even if no formal judgment is entered. The court determined that Feyijinmi’s probation before judgment, which required a guilty finding, constituted a conviction under federal law. This interpretation promotes national uniformity and prevents anomalous results that could arise from varying state definitions.
Next, the court addressed whether restitution ordered as part of a probation before judgment constitutes a “sentence” under § 1328(a)(3). The court concluded that “sentence” includes any penal consequences resulting from a determination of guilt, such as probation and restitution. The court found that Congress intended to except criminal restitution from discharge in bankruptcy to prevent federal proceedings from invalidating state-ordered restitution.
Finally, the court rejected Feyijinmi’s argument that the State’s labeling of the debt as “court fees” on its proof of claim affected its dischargeability. The court held that restitution debts are nondischargeable without any action by the creditor and that the State’s proof of claim and its characterization of the debt did not change its nature. The court also found no evidence of bad faith or unreasonable delay that could have prejudiced Feyijinmi.
NACBA filed an amicus brief in support of the Debtor/Appellant.
In re Feyijinmi – Appellants Brief
In re Feyijinmi – NACBAs Amicus Brief In Support of Appellant
In re Feyijinmi – Appellees Brief
Tips
- Accurately Characterize Claims: Ensure that proofs of claim accurately reflect the nature of the debt to avoid confusion and potential disputes in bankruptcy proceedings.
- Understand Federal Definitions: Be aware that federal law, not state law, governs definitions such as “conviction” and “sentence” in the context of bankruptcy dischargeability.
- Advising Clients on Restitution: Advise clients that restitution debts are generally nondischargeable in bankruptcy, even if labeled differently on proofs of claim or converted to civil matters.
