Collecting Restitution Didn’t Violate Bankruptcy Stay

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By Daniel Gill

The federal government’s collection of criminal restitution under the Mandatory Victims Restitution Act didn’t violate the automatic stay created by a bankruptcy filing, the Ninth Circuit ruled ( Partida v. DOJ (In re Partida) , 2017 BL 234471, 9th Cir., No. 15-60045, 7/7/17 ).

The Ninth Circuit joined the only two circuits having previously considered the question of whether actions under the restitution law are barred by the automatic stay.

The opinion by Circuit Judge Mary M. Schroeder relied on language in the law stating that the government has broad powers to enforce a civil judgment “notwithstanding any other federal law.”

Deborah Lynn Partida pleaded guilty in 2002 to embezzlement of labor union assets and served 18 months in prison. She also agreed to a judgment for criminal restitution.

Failing to pay, she filed a Chapter 13 bankruptcy case on March 5, 2013. She owed about $218,000 of restitution.

Filing a bankruptcy case invokes an “automatic stay” from collection efforts against the debtor or property of the bankruptcy estate, pursuant to 11 U.S.C. §362(a).

Despite the automatic stay, the government started collecting on the restitution by deducting payments made to Partida as income. Partida sought to hold the government in contempt for violating the automatic stay, but the bankruptcy court denied it.

After the Bankruptcy Appellate Panel of the Ninth Circuit affirmed the bankruptcy court, the Ninth Circuit again affirmed.

"[T]he plain language of the MVRA makes clear that the government can collect restitution, despite any federal laws to the contrary,” the court said. “There has been no violation of the automatic stay because the MVRA trumps the automatic stay,” it said.

The only circuits to consider the question, the Sixth and Second Circuits, ruled similarly, it said.

Circuit Judge Johnnie B. Rawlinson and District Judge William H. Stafford Jr., sitting by designation, joined in the opinion.

Daniel L. Geyser, Los Angeles, represented Partida. The U.S. Government was represented by Assistant U.S. Attorney Daniel G. Bogden, Las Vegas, Nev.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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