Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Diane Davis
Sept. 26 — A prisoner incarcerated in Minnesota for “various criminal convictions” can discharge his room and board costs — incarceration costs — in his Chapter 7 bankruptcy proceeding ( Cty. of Dakota v. Milan (In re Milan), 2016 BL 312159, B.A.P. 8th Cir., No. 16-6012, 9/22/16 ).
Judge Anita Louise Shodeen of the U.S. Bankruptcy Appellate Panel for the Eighth Circuit Sept. 22 concluded that incarceration costs are subject to discharge under Bankruptcy Code Section 523(a)(7).
The Bankruptcy Code precludes discharge of a debt for a fine, penalty or forfeiture owing to a governmental unit unless it is “pecuniary in nature,” the court said, citing Section 523(a)(7). The incarceration costs are not, however, identified as a fine or penalty, were not ordered by the state criminal court, and weren't a condition of debtor Jacob Jerome Milan's sentence, the court said.
When the debtor filed Chapter 7 bankruptcy, in which a debtor's nonexempt assets are liquidated by a trustee, and the proceeds are distributed to creditors, he included his incarceration costs as a non-priority unsecured debt.
The County of Dakota filed an adversary proceeding to have the debt in the amount of $3,500 excepted from discharge under Section 523(a)(7).
The bankruptcy court determined that the incarceration costs didn't meet the statutory requirements to be excepted from discharge. The County of Dakota appealed the bankruptcy court's judgment.
“To be excepted from discharge such a debt must be penal in nature, and must be shown directly through statutory or regulatory language that indicates an intent to punish a debtor,” the court said.
“The purpose of the incarceration costs is to allow Dakota County to ‘RECOUP A PORTION' of the costs of housing prisoners,” the court said. The “clear intent for” the incarceration costs is pecuniary in nature, the court concluded. As a result, they are subject to discharge, the court said.
In a recent ruling in the Ninth Circuit, a mother in California was able to discharge debt for her son's juvenile detention ( Rivera v. Orange Cty. Prob. Dep't (In re Rivera), 2015 BL 258187 (9th Cir. 2016) (28 BBLR 1052, 8/18/16).
Judges Barry S. Schermer and Charles L. Nail joined the opinion.
Jeffrey A. Timmerman, Dakota County Attorney's Office, Hastings, Minn., represented the plaintiff County of Dakota; Kenneth Corey-Edstrom, Larkin & Hoffman, Minneapolis, represented defendants/debtors Jacob Jerome Milan and Ashley Kaye Milan.
To contact the reporter on this story: Diane Davis in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)