When ordered to pay restitution to victims, some defendants try to declare bankruptcy to avoid it. Here’s how to remove that bankruptcy shield and enforce the sentence.
Not long ago, I found myself in a disposition hearing, the punishment phase of a juvenile proceeding. The respondent (what we call a juvenile defendant) owed the victim several thousand dollars for damage he caused to her property. The young man agreed to most of the conditions of probation except for restitution; his mother claimed that she was in bankruptcy and could not pay. This was the first I had heard of her financial situation, and the judge reset the hearing to determine if he could proceed if the respondent’s mother was, in fact, bankrupt.
A primer in restitution
I went back to my office to see what, if anything, could be done about getting our victim her money. The respondent’s mother had not specified whether she was about to file for bankruptcy, had already filed, or was currently in bankruptcy. (I called the defense attorney to clarify the issue, but I wanted to plan for all contingencies.) I first looked at Family Code §54.041, which states, “The juvenile court … may order the child or a parent to make full or partial restitution to the victim of the offense. … This section applies without regard to whether the petition in the case contains a plea for restitution.”1 If this case were in the adult courts, Article 42.037 of the Texas Code of Criminal Procedure would guide us. It notes that in ordering restitution, the court should award the higher amount of either the value of the property on the date of the loss or the value of the property on the date of sentencing.2 The court may even order the defendant to perform services or make restitution to a person other than the victim or organization with the victim’s consent.3 If there is a dispute regarding the amount of restitution, the burden is on the State to show, by a preponderance of the evidence, the amount of loss.4 The burden for showing the defendant’s financial needs and resources is of course on the defendant.5 The code also discusses unemancipated minors; if they are unable to pay, they may perform community service, or the court may order the person who supports the minor to pay.6 A trial court is given broad discretion in ordering restitution; however, there are some restrictions.7
My first concern in my case was what would happen if the respondent’s mother had filed for bankruptcy and listed the victim as a creditor—a highly unlikely scenario, but I wanted to cover all of my bases. In Cabla v. State,8 the defendant stole thousands of dollars from victims by promising to perform general contracting work. The defendant then shut his doors, filed Chapter 7 bankruptcy, and claimed all the victims as creditors, discharging their debts. In this case, the court noted the disparate aims of restitution and bankruptcy by saying, “The goal of the bankruptcy system is not to punish, but to allow the honest debtor to re-start his financial life.”9 Restitution, however, “was intended to ‘adequately compensate the victim of the offense’ in the course of punishing the criminal offender.”10 The Cabla court goes on to distinguish restitution in discussing Kelly v. Robinson by saying, “Restitution is a component of the criminal justice system ‘not operated primarily for the benefit of the victim, but for the benefit of society as a whole.’11 Society is benefitted by punishment, including restitution, that is directly related to the offenses for which a defendant has been charged and convicted.”12
The court in Cabla looked at Kelly v. United States, in which the U.S. Supreme Court was faced with whether restitution that has already been ordered can be discharged in a Chapter 7 liquidation of debt,13 and the Supreme Court ruled that restitution is nondischargeable under Chapter 7.14 The Bankruptcy Code was amended after Kelly to make sure a defendant could not discharge restitution owed to victims in Chapter 13 bankruptcy.15 This was a great result for my victim against any claim of bankruptcy protection.
After reviewing this precedent, I thought about the second argument that could come: that filing for bankruptcy stays any criminal proceedings. Normally, when a petition is filed in bankruptcy court, other proceedings are stayed.16 The Bankruptcy Code, however, allows for certain exceptions, including “the commencement or continuation of a criminal action or proceeding against the debtor [and] … the enforcement of a judgment other than a money judgment, obtained in an action or proceeding by the governmental unit to enforce such governmental unit’s or organization’s police or regulatory power.”17 Additionally, various Texas courts have taken note of the exception to the staying provision in federal bankruptcy.18 So long as I made the judge aware of these provisions if it came up, we could proceed as planned. (This issue was never raised in my case, but I was ready for it!)
The next question that came to mind was who had to prove that the defendant/respondent filed a petition in bankruptcy court? I discovered after some searching that the defendant must prove the filing,21 and the judge noted as much when he asked the respondent’s attorney to provide proof in the courtroom.
So with a memo in hand, I walked down to the clerk’s office and filed my research in writing. After carefully considering the issue and reviewing the caselaw, the judge sided with us and ordered the full amount of restitution.
It was great to tell the victim that the respondent could not hide behind the bankruptcy law. It is important that when we are faced with laws that are foreign to our normal practice, we strive on to ensure our victims are not left to fend for themselves because financial loss can be just as harmful as physical pain. i
1 Tex. Fam. Code §54.041(b).
2 Tex. Code Crim. Proc. art. 42.037(b)(1)(B)(i)-(ii).
3 Id. at art. 42.037(b)(3).
4 Id. at art. 42.037(k).
6 Id. at art. 42.037p(2)(A)-(B).
7 The amount must be just and supported by a factual basis within the record; the restitution ordered must be only for the offense for which the defendant is criminally responsible; and the restitution ordered must be only for the victim(s) of the offense with which the offender is charged. Cantrell v. State, 75 S.W.3d 503, 512 (Tex.App.—Texarkana 2002); see also Cabla v. State, 6 S.W.3d 543, 546 (Tex.Crim.App.1999).
8 6 S.W.3d 543.
9 Id. at 546.
10 Id. at 545.
11 Kelly v. Robinson, at 50, 107 S.Ct. 353.
12 Id. at 545-46.
13 479 U.S. 36, 38 (1986).
14 Id. at 50.
15 6 S.W.3d at 547-48.
16 11 U.S.C. § 362.
17 Id. at (b)1, 4.
18 See In re Delta Wiese, 1 S.W.3d 246, 249 (Tex. App.—Corpus Christi 1999); In re Mona Naguib, No. 05-04-01010-CV, 2004 WL 2335029, at *2 (Tex.App.—Dallas Oct. 18, 2004).
19 See Feinmore v. State, 716 S.W.2d 672, 674 (Tex.App.—Corpus Christi 1986) (stating, “Although the subjects of a bankruptcy filing by Appellant and whether ordering Appellant to pay restitution violates the automatic stay provisions were discussed in the record, there are no documents from a bankruptcy court in the record proving that Appellant has filed bankruptcy. It is Appellant’s duty to insure that the record contains all materials necessary for appellate review”). See Franklin v. State, 693 S.W.2d 420, 431 (Tex.Crim. App.1985) (“mere assertions in a brief not supported by evidence in the record will not be considered on appeal. Id”).
* Special thanks to C. Yang and A. Herrera.