Prison debt may be discharged under certain conditions

In a Chapter 7 bankruptcy, people are able to discharge much of their debt and start fresh with a clean financial slate. There are some expenses, such as school debt and child support, that can not be wiped free from the list of owed debts. Other expenses that are not eligible for discharge include penalties and fines that are given by a criminal court of law. In some cases, however, certain situations in Illinois may be difficult to discern whether the debt is criminal in nature. One case showed how even though a debt is connected to a prison does not always mean that it is exempt from bankruptcy.   

One man in Minnesota was able to write off the cost of his room and boarding for his stay in prison. When the man filed for Chapter 7 bankruptcy, he listed his prison expenses under non-priority unsecured debt. The U.S. Bankruptcy Appellate Panel for the court determined that the debt could indeed be written off under liquidation bankruptcy as it met the requirements under the state code. The court ruled that in order to be exempt from discharge, the debt must be given to punish a person or be penal in nature. Prison room and boarding, on the other hand, did not fall under this category, as it was simply the prison’s attempt to get back some of the money used to house the prisoner.  

When people are facing large amounts of debt and cannot make ends meet, they may want to consider bankruptcy. Depending on their particular financial situation, people have different options when it comes to eliminating portions of their debt. People may want to speak with a bankruptcy attorney, who may be of help.

Source: Bloomberg BNA, “Prisoner Can Discharge Incarceration Costs in Bankruptcy,” Diane Davis, Sept. 30, 2016. 

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