Automatic Stay Does Not Preclude Criminal Restitution Collection

Posted by NCBRC - July 19, 2017

The automatic stay does not prevent the government from collecting criminal restitution under the Mandatory Victim’s Restitution Act, 18 U.S.C. § 3613(a). Partida v. U.S. Dept. of Justice, No.15-60045 (9th Cir. July 7, 2017).

Deborah Partida was convicted of embezzlement and theft of labor union funds. She filed for chapter 13 bankruptcy owing over $200,000 in court-ordered restitution for the crime. When the government offset the debt against her current income, she moved to hold it in contempt for stay violation. The bankruptcy court denied the motion and the Bankruptcy Appellate Panel affirmed. Partida v. United States (In re Partida), 531 B.R. 811 (B.A.P. 9th Cir. 2015).

On appeal, the Ninth Circuit began with a comparison of the purposes behind bankruptcy’s automatic stay, enacted in 1978, and the MVRA. The automatic stay is designed to give the debtor some breathing room while addressing his debts. It is not, however, intended to provide a “haven for criminal offenders.” In fact, section 362(b)(1) provides that the automatic stay does not apply to “the commencement or continuation of a criminal action or proceeding against the debtor.” In contrast, the MVRA, enacted in 1996, was intended to ensure that criminal offenders make restitution regardless of their financial condition and “[n]otwithstanding any other federal law.”

Ms. Partida argued that the “notwithstanding” clause of the MVRA supersedes only substantive laws concerning the property subject to collection and does not affect procedural laws like the automatic stay which go to the timing of collection. She supported this argument with the language of the MVRA that “[t]he United States may enforce a judgment imposing a fine in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.”

The court read the “notwithstanding” clause more broadly than did Ms. Partida finding that it “swept aside” conflicting laws including the automatic stay provision, which, the court noted, had been in place for almost two decades before the MVRA was enacted. The phrase cited by Ms. Partida as limiting the government’s power to collect in fact does the opposite: it allows the government to use the collection methods already in place under other federal laws such as the FDCPA instead of being limited to the collection methods found in individual state laws as was previously the case under criminal restitution laws.

The Ninth Circuit joined the Second and Sixth Circuits in finding that the automatic stay does not preclude pursuit of restitution under the MVRA. See In re Robinson, 764 F.3d 554 (6th Cir. 2014); United States v. Colasuonno, 697 F.3d 164 (2d Cir. 2012). In Robinson, the Sixth Circuit reasoned that the MVRA precludes application of the automatic stay, while, in Colasuonno, the Second Circuit held that pursuit of criminal restitution fell within the exception to the automatic stay found in section 362(b)(1) and therefore the statutes were not in conflict. The Ninth Circuit distinguished Colassuono as involving an ongoing criminal case, however, and did not rely on the same exception for its holding.

Finding that the automatic stay did not apply to collection efforts pursuant to the MVRA, the Ninth Circuit affirmed.

Partida 9th Cir. opinion July 2017

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