Whether you can eliminate (discharge) a government fine, penalty, or ticket in bankruptcy depends on the government's intent on issuing the fine. If the government entity imposed the fine as punishment, then you cannot wipe it out in bankruptcy. However, if the government intends the fine to compensate it for a financial loss, then you can discharge it in bankruptcy. (Learn what it means when a debt is discharged in bankruptcy.)
The law refers to government fines in many ways: fines, penalties, forfeitures, tickets, tolls, and surcharges. The law may also classify fines as criminal, civil or administrative. The common element for purposes of this article: The fine (or whatever other label used) is owed to a governmental unit. The unit can be a municipal, state, federal or pseudo-governmental entity, like a tollway authority.
What the fine is called, however, does not determine whether it is dischargeable in a Chapter 7 bankruptcy case.
Whether you can discharge a fine in bankruptcy depends on the nature of the charge or what it is intended to accomplish. If the fine is penal in nature -- that is, the fine is intended to punish you for wrongdoing -- you cannot discharge in in a Chapter 7 case. On the other hand, if the fine is designed to compensate the government for its pecuniary (monetary) loss, you can discharge it in bankruptcy.
Example. Let’s say you spray paint graffiti in a public park. If caught, you would likely receive two fines: One for defacing public property and one for the cost of cleanup or repair. The first fine would likely be nondischargeable because it is intended to punish you for failing to abide by the law. The second would likely be dischargeable because it is designed to compensate the city for removing the paint.
Whether a fine is penal in nature may also depend on how state or local law characterize the infraction. For instance, misdemeanors and felonies are usually considered criminal, which means you could not discharge the fine in bankruptcy. But many states and municipalities do not designate parking tickets and many traffic tickets as criminal -- you could argue that those should be eligible for discharge in a Chapter 7 case.
Below are some fines and penalties that many bankruptcy files wish to discharge. In some cases, it may be difficult to know whether the fine is penal or compensatory in nature. It may depend on the jurisdication, and even then, experts may disagree as to whether the fine is dischargeable or not. If you want to discharge a fine in bankruptcy, talk to a local bankruptcy attorney.
Many fines and penalties that cannot be discharged in a Chapter 7 case can be discharged in a Chapter 13 case. These include fines for traffic violations, parking tickets, building code violations, and toll charges.
However, there are some fines that you cannot discharge in Chapter 13, such as those that are included in a sentence for criminal conviction. For example, you would not be able to discharge a fine imposed by a court as part of a conviction for a drug offense or robbing a convenience store. (Learn more about debts that you can discharge in Chapter 13 bankruptcy.)