Bankruptcy and Debts

• Depending on the type of bankruptcy petition you file, you're asking the court to discharge some or all of your debts. In a classic Chapter 7 "liquidation" bankruptcy, most of your property gets sold off, with the money going to your creditors, and the court discharges the remaining debts. In a Chapter 11 or Chapter 13 "reorganization" bankruptcy, you pay off some of your debts, while the court reduces or eliminates others. In theory, at the end of either process, you would walk away debt-free, with a clean slate. But criminal judgments are non-dischargeable. Even after you emerge from bankruptcy, they're still on your slate. And you remain obligated to pay them, as if you'd never filed bankruptcy.
  
  

Criminal Judgments

• No debts stemming from criminal judgments are ever dischargeable in bankruptcy. That applies not just to criminal fines and any restitution you may have been ordered to pay, but also to court costs and any court-ordered attorney fees. If the corrections department sends you a bill for the time spent in prison, that's not dischargeable, either, as it's technically part of your sentence.
  
  

Civil Judgments

• Civil judgments stemming from allegations of criminal activity are often non-dischargeable---even if you were never criminally convicted, or even charged. These include financial crimes such as fraud and embezzlement, as well as willful or malicious injury. Say you got in a fight and beat someone up. A criminal court may find you guilty of assault and fine you $10,000, and that debt won't be dischargeable. But the victim could also sue you and win a civil judgment for $250,000; that's not dischargeable either. Also non-dischargeable: civil judgments for wrongful death or personal injury stemming from accidents in which you were operating a motor vehicle, boat or aircraft while intoxicated.
  
  

No Loopholes

• Personal loans are dischargeable in bankruptcy, which appears to offer a loophole: Take out a loan to pay the criminal judgment against you, then declare bankruptcy and get that loan discharged. However, U.S. Bankruptcy Code forbids it. Under the law, not only are criminal fines and penalties non-dischargeable, but so is any debt that "results" from a criminal fine or penalty.