Criminal Law and Procedure; Sentences; Probation; Restitution; Bankruptcy Proceedings

Subject:

Criminal Law and Procedure; Sentences; Probation; Restitution; Bankruptcy Proceedings

Requested By:

The Honorable Peter W. Hairstons Resident Superior Court Judge Twenty-second Judicial District

Question:

The defendant-probationer was convicted in Superior Court of assault with a deadly weapon with intent to kill, inflicting serious injury. As a condition of probation, he was ordered to pay restitution, in installments, to the victim. His failure to honor the condition of restitution has caused his probation officer to file a violation of probation report with the Court. May an Order of Arrest be signed, or is the Court precluded from having the defendant-probationer arrested for violation of condition of probation by virtue of the fact that the defendant-probationer is involved in bankruptcy proceedings in Federal Court?

Conclusion:

The defendant-probationer may be jailed.

On June 26, 1978 the defendant-probationer plead guilty to assault with a deadly weapon with intent to kill, inflicting serious injury in the Superior Court of Davidson County. On June 28, 1978, the defendant-probationer was sentenced to not less than five nor more than ten years, sentence suspended upon the performance of conditions referred to below. On June 3, 1980, a violation report against the defendant-probationer was filed. Said report reads, in part, as follows:

"At the time defendant-probationer was placed on probation, he was ordered to pay court indebtedness at the rate of $125.00 each month until paid in full. As of June 4, 1980, subject is $657.00 in arrears and has made no payments since December 1979, however, he has filed a claim in United States Bankruptcy Court under Chapter 13. His failure and refusal to pay monies as ordered by the Court is in violation of the condition of probation – "he shall pay into the Office of the Clerk of Court, P.O. Box 1064, Lexington, North Carolina court costs of $74.00 and restitution as follows: $4,000.00 as restitution to Mr. Lester Carroway, 203 Brown Street, Lexington, North Carolina. Defendant-probationer is to pay $125.00 per month to the Clerk’s office until balance is paid. Payments to begin August 1, 1978, and like sum of $125.00 due and payable on the first day of each and every month thereafter until paid. Clerk of Superior Court to disburse check to Lester Carroway on a monthly basis. Costs to be paid no later than $90 days (sic) from this date." Costs – $74.00."

On April 1, 1980, subsequent to defendant-probationer’s filing for bankruptcy, the United States Bankruptcy Court for the Middle District of North Carolina entered an order confirming a plan under 11 U.S.C., Chapter 13.

Generally speaking, the filing of a proper petition pursuant to the provisions of 11 U.S.C., Chapter 3 results in an automatic stay against the collection efforts of a petitioner’s creditors. The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives a debtor a "breathing spell" from his creditors. It normally stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures which have driven him into bankruptcy. However, the present inquiry leads us into the realm of state court criminal proceedings and the matters attendant thereto. The issue presented is whether the filing of bankruptcy proceedings in a federal court precludes further action by a state court against a criminal defendant who has been convicted of a crime and ordered to pay restitution as a condition of probation.

An examination of the provisions of 11 U.S.C. §§ 523 and 1328, dealing with debts which constitute exceptions to discharge and 11 U.S.C. § 362, dealing with exceptions to a provision for automatic stays against certain creditor collection efforts, sheds little light on the issue, except that § 362(b)(1) does provide that a filing of a petition under § 301, 302, or 303 of the title does not operate as a stay ". . . of the commencement or continuation of a criminal action or proceeding against the debtor; . . . ." No other provisions of the new Bankruptcy Act appear helpful.

Cases from other jurisdictions, however, have addressed the issue presented and have solidly held for the proposition that federal bankruptcy proceedings in no way operated to stay, or otherwise effect, state court criminal proceedings in which no debtor-creditor relationship between the defendant and his victim can be construed to exist.

"A discharge in bankruptcy has no effect whatsoever upon a condition of restitution of the criminal sentence. A bankruptcy proceeding is civil in nature and is intended to relieve an honest and unfortunate debtor of his debts and to permit him to begin his financial life anew (In Re Munford, D.C. 255 F. 108). A condition of restitution in a sentence of probation is a part of the judgment of conviction. It does not create a debt nor a debtor/creditor relationship between the persons making and receiving restitution. As with any other condition of a probationary sentence it is intended as a means to insure the defendant will lead a law-abiding life thereafter. (Penal Law, § 65.10).

It would thus be against our statute and public policy to permit a defendant who has received illegal gains and who was ordered to make restitution as a condition of his sentence to vacate such conditions by a discharge in bankruptcy." People v. Mosesson, 356 N.Y.S. 2d 483, 484-85, (1974). See also: People on Inf. of Anerbach v. Topping Bros., 359 N.Y.S. 2d 985 (1974).

In People v. Washburn, 158 Cal.Rptr. 822 (1979), the California Court of Appeal, citing and following the holding of Mosesson, said the following at page 824:

"Defendant principally contended before the appellate department of the superior court, and here, that the law of the United States or bankruptcy is the supreme law of the land on that subject and that it would therefore be contrary to the United States Constitution to impose upon him a

condition of probation requiring restitution of a "debt" which has been lawfully discharged in
bankruptcy.

The rationale of the appellate department was that bankruptcy obviously related to "provable
debts’ (see e.g., 11 U.S.C. § 1(14)) but that amount ordered to be paid by the municipal court as
restitution is not a "debt" within the meaning of the bankruptcy law. The appellate department
concluded that a condition of probation which consisted of restitution to a victim of a criminal
act could have no relationship to "debt" to the victim, since it is part of a judgement of conviction
and is for the purpose of punishment, rehabilitation and helping to insure defendant will lead a
law-abiding life.”

Thus, it would appear that the Superior Court order of June 26, 1978 remains fully enforceable,
the pendancy of the federal bankruptcy proceedings not withstanding, and the Superior Court of
Davidson County is fully empowered to incarcerate the defendant-probationer for violation of the
terms and conditions of probation.

As a caveat we note the issue presented and the response to said issue concern only a situation in
which the court has, for reasons of rehabilitation, ordered the payment of restitution to an injured
victim. Neither the issue nor the response thereto are intended to apply to criminal cases in which
payments ordered by the court are related to some preexisting debtor/creditor relationship
between the defendant-probationer and the victim. In the latter type of case, such as one in which
the ordering of repayment is based upon a conviction for the utterance of a worthless check, the
law is somewhat less clear.

Rufus L. Edmisten
Attorney General

James Wallace, Jr.
Deputy Attorney General for Legal Affairs